What is an open order in securities trading?

• A. An order that must be executed immediately
• B. An order that is valid until filled or cancelled
• C. An order that is only effective for the current trading day
• D. An order that automatically expires at the end of the month

Answer: (B)

An open order in securities trading refers to an order that remains active until it is either filled or explicitly cancelled by the trader. This type of order is not limited to a specific timeframe, allowing it to be executed at any point in the future as market conditions permit, provided the security reaches the stipulated price.

The nature of an open order provides flexibility and can be particularly beneficial for traders who anticipate price movements over time but may not want to monitor the market continuously. This contrasts with other types of orders, such as day orders, which expire if not executed by the end of the trading day, or market orders, which must be executed immediately. Open orders can be crucial for strategic trading decisions where timing and price points are essential for successful execution.