Question: You are an individual investor on the phone with your broker discussing a potential purchase of 10 round lots of stock (a long position) issued by what you believe is a sound corporation with growth potential. You express concern that today's stock price is about $1.50 per share higher than what you would like to pay. Which of the following options should the broker suggest to address your concern?
A. Buy the stock on margin because margin provides leverage that offers the potential to gain more on a percentage basis than a cash purchase. The added leverage and potentially greater gain may compensate for the higher cost.
B. When the stock price begins its decline, place a market order. By timing the purchase in this manner, the investor can increase the chances of narrowing the premium the market requires at the current price.
C. Enter a stop order to protect price movement above and away from your target purchase price.
D. Enter a limit order, thereby creating a market order only when the stock price is at or below the limit price.