You short-sell 200 shares of Rock Creek Fly Fishing Co., now selling for $50 per share. If you want to limit your loss to $2,500, you should place a stop-buy order at . A. $37.50 B. $62.50 C. $56.25 D. $59.75

The answer is B. $62.5

Explanation:

A stop order is an order to either buy or sell a stock immediately the stock price reaches a certain price. This particular price is called stop price.

A buy stop order is an order to buy a stock immediately the its price reaches a certain stop price. When stop price is above the current market price, a buy stop order is made.

Let's now go back to the question;

Stop buy order will be placed at:

($2,500 / 200 shares) + $50

= $12.5 + $50

= $62.5

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