If the closing price of the stock ABC is 100$ and I place a buy limit order at 105$ because of good news, what happens if the market opens at 107$, will the orders between last closing and new opening will be filled or just those above the new opening?

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If the closing price of the stock ABC is 100$ and I place a buy limit order at 105$ because of good news, what happens if the market opens at 107$, will the orders between last closing and new opening will be filled or just those above the new opening?

In: Economics

2 Answers

Anonymous 0 Comments

Not accounting for after hours. In a liquid market (ie sufficient buy and sell orders at all prices), your order will not be filled. If it opens at $107 then it signals (in a perfect market) that, at market open, there are no sellers willing to sell below that price and no buyers willing to pay above that price.

EDIT:

In a more real market, $107 is the “last order filled” price. The actual buy-sell spread might be different from that. For example if there was really really good news from ABC overnight, then the lowest priced open sell order could be at $122 and the highest priced open buy order at $118 at market open. If that situation persists, then it is likely that the next order filled would be closer to $120.

Anonymous 0 Comments

So in traditional trading, such as the nyse, at 4pm the stock market closes. Monday Acme stock closed at $100. After the close of market, we learn about some good news about Acme. So Tuesday morning at 9am, lots of people want to buy it, there is more demand, and now people are willing to pay $110. There was no period of time when it was some value in the middle.

Think of it this way, you’re sitting at the dock, I ask if you want to buy a life preserver. You might say, better safe than sorry, but I don’t need it, so I’ll buy it for $5. The next day you’re again at the dock, but this time the section you’re sitting on broke and you fell in. You see me and say give me a life preserver. I tell you it’s now $100, you’re super willing to pay.

Now a days there is after hours trading, and sometimes your own financial institution might link their own customers together, one who is a buyer, and one who is a seller, and so overnight there might be some price fluctuations. Sometimes the last after hours trading is the opening of price the next day, but not always