What happens to a day order if it is not executed on the day it is entered?

What happens to a day order if it is not executed on the day it is entered?

• A. It remains valid until executed
• B. It converts into a limit order
• C. It automatically expires
• D. It gets reinstated the following business day

Answer: (C)

The selected answer is accurate because a day order is specifically designed to remain valid only for the duration of the trading day on which it is placed. If the order is not executed by the end of that trading day, it automatically expires, meaning that it will not carry over into the next trading day. This is foundational in trading practices, as day orders are commonly used by traders who want to take advantage of market movements without holding positions overnight.

The other options describe scenarios that do not align with how day orders function. For instance, a day order does not remain valid beyond its designated trading day or convert to another type of order, such as a limit order. It also does not get reinstated the following business day; rather, if a trader wishes to re-enter the order, they would need to do so manually on the next trading day. Understanding these characteristics helps clarify the distinction between different types of orders and their intended lifespan in the trading environment.