Stop-loss order

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Stop-loss order

An order to unwind a position when the price moves against you. This order is designed to limit losses or in some cases to lock in a certain level of profit. As soon as the price of the security hits the stop-loss price (or falls below), the order becomes a market order. If you were short the asset, the stop-loss would trigger a purchase. Stop-losses are often disabled for after hours trading because prices are often quite variable and you could be executed at an unfavorable price. Stop losses are also usually calculated off the bid price (which is a measure of what people are actually willing to pay if the security is sold). Again, one needs to be careful because if there is lack of liquidity, the bid-ask spread could be large and you could be stopped out at an unfavorable price. Finally, some traders have rolling or trailing stop loss. As the price moves up the stop-loss is moved higher (say 20% below the current price).

Stop-Loss Order

An order to a broker to buy or sell a security at the best available price once a certain, stated price is reached. Suppose that price is $50. A stop order remains inactive until that security begins trading at $50, at which point the broker may fill the order at best price he/she is able to find. A stop-loss order is technically the same as a stop order, but carries the connotation of avoiding further losses rather than seeking to cash in on future gains. See also: Protective stop.
References in periodicals archive ?
Caption: Exhibit 2: How Internal Charges, Reserves, and Stop Loss Work Together to Create a Sustainable Funding Strategy
A frequently cited objective for captives, especially for risks with low frequency but potentially high severity, or large medical claims, is to build a loss fund over time to offset large claims that could be lasered by a stop loss carrier when they occur.
Guaranteed Stop and Stop Loss orders are used by investors to protect their downside when they trade.
I mean the employer is paying his own claims and limiting his downside with stop loss.
For example, increased demand for self-insurance due to the ACA could reduce stop-loss insurers' concerns about adverse selection (e.g., if, previously, only risky firms sought comprehensive stop loss), which might affect stop-loss premiums.
We start by investigating a simple strategy where we take a long position in all stocks and where the exit point is done according to a trailing stop loss. The equity curve can be seen in Exhibit-2 below.
Because of the present stop loss market, these groups would like to see their insurance not as a price-based commodity but as a longterm investment.
However, while a stop loss will mostly ensure losses in this example do not exceed pounds 100, it will not guarantee it.
The authority for Stop Loss has existed since 1984 (Section 12305, Title 10) and enables the President to suspend the laws relating to promotion, retirement and separation during periods of national emergency or a Presidential call-up of the reserve components.
Stop Loss and Operational Hold (OPHOLD) Policy (May 15, 2003), available
Explicit forms of the contracts optimal for the insurer are derived which are stop loss or truncated stop loss depending on the initial surplus, a quota to be spend on reinsurance and pricing rules of both the insurer and the reinsurer.