What is open?
The term “open” appears in several uses on the financial markets. However, two of them are of particular importance, depending on the context in which they are used.
- Opening is the period for the start of trading on an organized stock exchange or over-the-counter market.
- An order to buy or sell securities is considered to be open or in force until it is canceled by the client, until it is executed or until it expires.
Depending on the exchange or location, the opening may be the first negotiated price executed for that particular day. It is very likely that the opening price will not be the same as the previous day’s closing price.
Other sites could sample trading for a short period of time around the start of the official trading day and create an official opening. It may or may not be the same as the price of the first transaction. This may be the method used for securities that have very little trading activity and may be just the day before closing.
Different exchanges will have different opening hours. For example, the New York Stock Exchange (NYSE) and the Nasdaq open at 9:30 a.m. EST, while the Chicago Mercantile Exchange (CME) opens trading in US Treasury futures at 8:20 a.m. (7:20 a.m. CST)
The main reason why an order remains open is that it has conditions, such as price limits or stop levels, unlike a market order. A limit purchase order, entered when the current negotiated price of the security is already higher than this limit price, will not be executed until the market has wanted to respect it. A buy stop order will not turn into a market order until the security has reached a specified price level.
Another reason may simply be the lack of cash for this particular security. If there are no offers and offers made by market makers or other traders, then no exchange takes place.
There is a related use of the open term that interests futures and options traders. Open interest is the total number of options or futures contracts open or outstanding that exist at any given time. Unlike the stock market, where the number of shares in circulation is set by the company itself and does not change very often, the interest in the derivatives markets is constantly changing. This can provide important information to traders and analysts on how market participants act aggressively in rising and falling price trends.