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limit short order

johnDoe 05-04-2008, 9:30 PM | Post #2514741 | 2 Replies

I have a question - what is the meaning of a limit short order? Can someone help me with an example?

Thanks.

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Re: limit short order

WERman 05-04-2008, 10:13 PM | Post #2514755

Say I think LEH is going down and I want to sell it short. But I don't want to sell it for less than $45. So I enter an order to sell short xxx shares of LEH at $45 limit. Good for the day or good until canceled. If it hits $45 or above, I sold it at the market price. If it doesn't hit $45 nothing happens.

If the order gets filled I would immediately enter a stop loss order. Buy to cover xxx shares of LEH at $50 stop, for example. Or if the price moves down I would cancel the stop loss order and enter a buy to cover order at $36 limit, for example.

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Re: limit short order

johnDoe 05-04-2008, 11:27 PM | Post #2514765

thank you... that makes sense. Now, suppose I were to sell short XYZ which was at $10 at closing on Monday. Now, bad news about the company came out after hours. So, I enter an order to sell short shares of XYZ at $8 limit. On Tuesday, the stock open at $6. Will my order get executed? If yes, will it be at $6? How about if I had set the limit at $8 and the stock opened at $9?

I am trying to draw parallels from a normal order, but since I have never shorted stocks, the process seems confusing.