| |
This concern about such orders leads to the next point of consideration. Many of these orders are designed with steady stocks in mind. These include stocks that can move up and down progressively and without any dramatic changes.
There are also stocks that might be extremely volatile. These include high-value stocks that can go up and down by tens of dollars in just a few minutes. Don’t forget that some stocks trade quickly with lots of volume involved. A stock with more volume might be more volatile. This could cause the stock to go well beyond the order you have placed. This is perfect if the stock is going up in value, but it could also be a serious problem if the stock is moving down.
As mentioned earlier, there is a chance your broker will charge a higher commission for a stop or limit order on a volatile stock. The risk of a stock option being harder to cover might be a problem for many brokers. They will feel a need to charge extra for an option due to the perceived risk of that investment.
