What characterizes a sell limit order?

A sell limit order is a type of instruction that an investor places with a broker to sell a specific security at a specified price or higher. This means that the order will only be executed if the market price reaches or exceeds the set limit price.

This characteristic is beneficial for investors who are looking to maximize their returns, as they can set a minimum price at which they are willing to sell an asset, thereby potentially capturing a better price than the current market value. For example, if an investor wants to sell shares of a stock and believes that the stock’s price will rise, they can place a sell limit order at a higher price. The order will remain unfilled until the stock reaches that price, ensuring the investor does not sell at a lower value.

The other options do not accurately represent the nature of a sell limit order. It does not execute at the market price nor guarantees execution at a lower price; rather, it is contingent on the specified limit being met. Additionally, a limit order does not remain open indefinitely, as there are usually conditions under which it may expire or be canceled. Thus, the correct choice effectively captures the definition and functionality of a sell limit order.