A stop loss order may not protect an investor's profits if
A) the price drops even slightly below the stop price before the order can be executed.
B) the price enters a prolonged period of gradual decline.
C) an unexpected event cause the price to drop steeply when the markets are closed.
D) the stop loss price is never reached.

Question

Quizplus · Accepted Answer

An unexpected event causing the price to drop steeply when the markets are closed can result in the stock opening at a much lower price than the stop loss level, bypassing the stop loss order and not protecting the investor's profits.

A Stop Loss Order May Not Protect an Investor's Profits