What is the effect if a stop buy order is placed above the last traded price?

When a stop buy order is placed above the last traded price, it is designed to become a market order once the specified stop price is reached or exceeded. The purpose of a stop buy order is to buy a security once its price moves above a certain level, indicating upward momentum or a breakout.

In this context, if the market price rises to or surpasses the specified stop price, the stop buy order is activated and will execute immediately at the best available market price. This mechanism allows traders to capitalize on upward price movements without needing to monitor the market continuously.

The other options do not accurately reflect the nature of a stop buy order. For instance, a stop buy order does trigger when the market price reaches the stop threshold, and it is not limited to conditions such as only being valid in a rising market. The order also does not convert to a market order in a context that does not involve reaching the specified limit. Thus, the correct choice accurately describes how a stop buy order operates.