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1.
Which type of order will sell a position at a specified price only once a predetermined limit (stop) has been triggered?
Stop-limit. A stop-limit order becomes a limit order once a stop has been triggered.
2.
For domestic exchange-traded funds, the best time to trade is _______.
The middle of the trading day.
3.
What is the term for the sum of the value of the constituents of an exchange-traded fund's underlying basket?
Net asset value (NAV). Net asset value is the aggregate value of the underlying securities. This can be found every 15 seconds throughout the day by referencing the intraday indicative value (IIV) index. This is a tool used to measure the current market price throughout the day.
4.
Why are limit-orders the most effective type of orders to use with exchange-traded funds?
They allow patient investors to receive the price they want. Limit orders give investors the greatest amount of flexibility in filling at the price the desire, if they are patient.
5.
What trading practice keeps exchange-traded fund prices close to their net asset values?
Arbitrage. With arbitrage, traders take advantage of the difference between the market price and the net asset value.
