‭Summary‬‭of‬‭the‬‭order‬‭types‬

‭In‬‭conclusion,‬‭it’s‬‭important‬‭to‬‭remember‬‭where‬‭the‬‭market‬‭needs‬‭to‬‭go‬‭for‬‭an‬‭order‬‭to‬‭trigger‬‭or‬
‭execute.‬‭Many use‬‭“‬‭SLOBS‬‭”‬‭and‬‭“‬‭BLISS‬‭”‬‭to‬‭help‬‭them‬‭recall‬‭how‬‭order‬‭types‬‭work.‬‭The‬
‭following‬‭visual‬‭is‬‭great‬‭to‬‭memorize‬‭and‬‭re-write‬‭on‬‭your‬‭scratch‬‭paper‬‭while‬‭taking‬‭the‬‭SIE‬
‭exam:‬

‭As‬‭you‬‭can‬‭see,‬‭using‬‭this‬‭visual‬‭can‬‭help‬‭you‬‭remember‬‭how‬‭these‬‭orders‬‭work.‬‭With‬‭sell‬
‭limits‬‭above‬‭the‬‭line,‬‭this‬‭tells‬‭you‬‭they‬‭execute‬‭when‬‭the‬‭market‬‭price‬‭is‬‭at‬‭or‬‭above‬‭the‬‭limit‬
‭price.‬‭With‬‭buy‬‭limits‬‭below‬‭the‬‭line,‬‭they‬‭execute‬‭when‬‭the‬‭market‬‭price is‬‭at‬‭or‬‭below‬‭the‬‭limit‬
‭price.‬

‭Stop‬‭orders‬‭don’t‬‭execute‬‭immediately,‬‭but‬‭they‬‭trigger‬‭at‬‭specific‬‭market‬‭prices.‬‭Utilizing‬‭the‬
‭SLOBS/BLISS‬‭visual,‬‭sell‬‭stops‬‭trigger‬‭when‬‭the‬‭market‬‭price‬‭is‬‭at‬‭or‬‭below‬‭the‬‭stop‬‭price.‬‭Buy‬
‭stops‬‭trigger‬‭when‬‭the‬‭market‬‭price‬‭is‬‭at‬‭or‬‭above‬‭the stop‬‭price.‬

‭In‬‭case‬‭you‬‭were‬‭wondering,‬‭the‬‭‘O’‬‭in‬‭“SLOBS”‬‭and‬‭the‬‭‘I’‬‭in‬‭“BLISS”‬‭are‬‭only there‬‭to‬‭make‬‭an‬
‭acronym.‬

‭Another item‬‭worth‬‭noting‬‭is‬‭when‬‭certain‬‭orders‬‭are‬‭adjusted‬‭for‬‭cash‬‭dividends‬‭.‬
‭When a‬‭company‬‭pays‬‭a‬‭cash‬‭dividend‬‭to‬‭its‬‭shareholders,‬‭its‬‭stock‬‭price‬‭drops‬‭by‬‭the‬‭amount‬
‭of‬‭the‬‭cash‬‭dividend‬‭on‬‭the‬‭ex-dividend‬‭date‬‭(the‬‭day‬‭the‬‭stock‬‭begins‬‭trading‬‭without‬‭the‬
‭dividend).‬‭The‬‭company‬‭loses‬‭an‬‭asset‬‭(cash),‬‭therefore‬‭the‬‭company‬‭is‬‭worth‬‭less‬‭than‬‭they‬
‭were‬‭before‬‭the‬‭dividend‬‭payment.‬

‭Assume‬‭you place‬‭the‬‭following‬‭order:‬

‭Buy‬‭100‬‭shares‬‭of‬‭GE‬‭stock‬‭@‬‭15 limit‬

‭GE‬‭stock‬‭is trading‬‭at‬‭$15.50.‬

‭You‬‭want‬‭to‬‭purchase‬‭100‬‭shares‬‭of‬‭GE‬‭stock,‬‭but‬‭not‬‭unless‬‭they’re‬‭trading‬‭for‬‭$15‬‭or‬‭less.‬
‭With‬‭the‬‭stock‬‭trading‬‭at‬‭$0.50 above,‬‭the‬‭order‬‭remains‬‭open‬‭(unexecuted).‬

‭If‬‭GE‬‭pays‬‭a‬‭dividend‬‭of‬‭$1‬‭per‬‭share,‬‭its‬‭stock‬‭price‬‭will‬‭fall‬‭to‬‭$14.50‬‭(from‬‭$15.50).‬‭Your‬‭order‬
‭would‬‭go‬‭through due‬‭to‬‭the‬‭dividend‬‭payment,‬‭not‬‭because‬‭of‬‭market‬‭forces.‬

‭By‬‭default,‬‭broker-dealers‬‭adjust‬‭orders‬‭placed‬‭below‬‭the‬‭market‬‭(buy‬‭limits‬‭and‬‭sell stops‬‭-‬‭see‬
‭SLOBS/BLISS‬‭above)‬‭to‬‭avoid‬‭this‬‭circumstance.‬‭Most‬‭investors‬‭that‬‭place‬‭orders‬‭“away”‬‭from‬
‭the‬‭current‬‭market‬‭want‬‭their‬‭order‬‭to‬‭fill‬‭due‬‭to‬‭market‬‭forces,‬‭not‬‭just‬‭a‬‭dividend.‬

‭Placing‬‭an‬‭order‬‭“away”‬‭from‬‭the‬‭market‬‭means‬‭placing‬‭an‬‭order‬‭that‬‭cannot‬‭currently‬‭be‬‭filled.‬
‭For‬‭example,‬‭placing‬‭a‬‭sell 100‬‭shares‬‭@‬‭$30‬‭stop‬‭when‬‭the‬‭market‬‭is‬‭at‬‭$31.‬‭The‬‭order‬‭cannot‬
‭execute‬‭until‬‭the‬‭market‬‭price‬‭is‬‭$30‬‭or‬‭below,‬‭therefore‬‭the‬‭order‬‭is‬‭“away”‬‭from‬‭the‬‭market‬

‭Occurring‬‭on‬‭the‬‭ex-dividend‬‭date‬‭,‬‭buy‬‭limits and‬‭sell‬‭stops‬‭(orders‬‭below‬‭the‬‭market)‬‭are‬
‭adjusted‬‭downward‬‭by‬‭the‬‭amount‬‭of‬‭the‬‭dividend.‬‭For‬‭example:‬

‭Buy‬‭100 shares‬‭of‬‭GE‬‭stock‬‭@‬‭$15‬‭limit‬

‭becomes‬

‭Buy‬‭100‬‭shares of‬‭GE‬‭stock‬‭@‬‭$14‬‭limit‬

‭If‬‭GE‬‭stock‬‭fell‬‭to‬‭$14.50‬‭after‬‭a‬‭$1‬‭dividend,‬‭your‬‭order‬‭would‬‭not‬‭go‬‭through‬‭due‬‭to‬‭the‬
‭adjustment.‬‭The‬‭market‬‭price‬‭must‬‭now‬‭fall‬‭to‬‭$14‬‭or‬‭below‬‭for your‬‭order‬‭to‬‭execute.‬
‭This‬‭adjustment‬‭occurs‬‭for‬‭all‬‭buy‬‭limits‬‭and‬‭sell‬‭stops‬‭unless‬‭the‬‭acronym‬‭“DNR”‬‭(Do‬‭Not‬
‭Reduce)‬‭is‬‭a‬‭part‬‭of‬‭the order.‬‭For‬‭example:‬

‭Buy‬‭100‬‭shares‬‭of GE‬‭stock‬‭@‬‭$15‬‭limit‬‭DNR‬

‭Even‬‭if‬‭GE‬‭stock‬‭pays‬‭a‬‭$1‬‭dividend,‬‭this‬‭order‬‭would‬‭not‬‭be‬‭reduced.‬‭Assuming‬‭a‬‭market‬
‭price of‬‭$15.50,‬‭a‬‭$1‬‭per‬‭share‬‭dividend‬‭would‬‭force‬‭this‬‭order‬‭to‬‭be‬‭filled‬‭immediately‬‭on‬‭the‬
‭ex-dividend‬‭date.‬

‭Key‬‭points‬

‭Orders‬‭placed‬‭above current‬‭market‬

‭‬ S
● ‭ ell limits‬
‭●‬ ‭Buy stops‬
‭●‬ ‭Not‬‭adjusted for‬‭cash‬‭dividends‬

‭Orders‬‭placed‬‭below‬‭current market‬

‭‬ B
● ‭ uy limits‬
‭●‬ ‭Sell stops‬
‭●‬ ‭Adjusted‬‭for cash‬‭dividends‬

‭Cash dividend‬‭adjustments‬

‭●‬ ‭Orders‬‭below‬‭the‬‭market‬‭adjusted‬‭downward‬‭by‬‭the‬‭amount‬‭of‬‭the dividend‬

‭DNR‬‭(do not‬‭reduce)‬‭orders‬

‭●‬ ‭Never‬‭adjusted‬‭for‬‭cash dividends‬