An order to purchase a stock if it drops to a certain price is called what?

An order to purchase a stock if it drops to a certain price is known as a limit order. This type of order is placed with the intention to buy a security at or below a specified price, ensuring that the investor does not pay more than they are willing to for the stock. In this scenario, the investor is waiting for the stock to reach a lower price before executing the purchase, which aligns perfectly with the definition of a limit order.

Market orders, on the other hand, are executed immediately at the current market price rather than waiting for the stock to reach a predetermined price. This does not apply to the scenario of purchasing a stock only if it drops to a specific price.

A margin account allows investors to borrow money from a brokerage firm to purchase securities, which is not relevant to setting conditions on stock purchases. Callable preferred shares represent a type of equity that a company can repurchase at a predetermined price before its maturity, which relates to corporate finance, not the mechanics of stock purchase orders.

Thus, limit orders are the precise mechanism for purchasing a stock at a defined lower price point, making it the correct choice in this context.