Table of Contents
What Is Open?
You might come across the term 'open' in various ways in financial markets, but I want to focus on the two most significant ones, depending on the context.
First, the open is the starting period of trading on a securities exchange or organized over-the-counter market. Second, an order to buy or sell securities stays open, meaning it's in effect, until you cancel it, it's executed, or it expires.
Understanding Open
Let me break this down for you further.
Market Open
Depending on the exchange or venue, the open could be the price of the first trade executed that day. It's common for this open price to differ from the previous day's closing price.
In some venues, they might sample trades over a short period at the start of the official trading day to establish an official open. This might not match the first trade's price, and for securities with low trading activity, it could just be the previous day's close.
Exchanges have different opening times. For example, the New York Stock Exchange (NYSE) and Nasdaq open at 9:30 am EST, while the Chicago Mercantile Exchange (CME) starts trading U.S. Treasury securities futures at 8:20 am EST (that's 7:20 CST).
Order Open
The main reason an order stays open is that it has conditions attached, like price limits or stop levels, unlike a straightforward market order. If you place a limit order to buy when the current price is already above your limit, it won't execute until the market drops to meet it. A buy stop order only becomes a market order once the security hits a specified price level.
Another reason could be a simple lack of liquidity for that security. If there are no bids or offers from market makers or other traders, no trading happens.
There's also a related concept for futures and options traders: open interest. This is the total number of open or outstanding options or futures contracts at any given time. Unlike stocks, where the number of shares is fixed by the company and doesn't change often, open interest in derivatives shifts constantly. This can give you valuable insights into how aggressively participants are acting in rising or falling price trends.
Disclaimer
Remember, I'm not providing tax, investment, or financial services and advice here. This information doesn't consider your specific investment objectives, risk tolerance, or financial circumstances, and it might not suit all investors. Investing carries risks, including the potential loss of principal.
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