How is a stocks opening price determined each day?
March 5th, 2008 | by admin |mt_si_guy asked:
Does the after hours trading price determine the stocks opening price on the next day? Lets take poor old wamu (WM) as an example. On friday WM close at 0.1604, but the after hours trading price indicates it’s now up 1.53 to 1.69. So does this mean that if the market were to open right now WM would open at 1.69? If after hours trading doesn’t determine a stocks next day price, what does? Thanks in advance.
Does the after hours trading price determine the stocks opening price on the next day? Lets take poor old wamu (WM) as an example. On friday WM close at 0.1604, but the after hours trading price indicates it’s now up 1.53 to 1.69. So does this mean that if the market were to open right now WM would open at 1.69? If after hours trading doesn’t determine a stocks next day price, what does? Thanks in advance.
2 Responses to “How is a stocks opening price determined each day?”
By Ranto on Mar 8, 2008 | Reply
For NYSE stocks, the specialists set the opening price using the mechanism of a call auction. They look at the schedule of market and limit orders, add in their own demand and set the price at the market clearing price.
It does not include trades that were made outside the NYSE after hours — but does include buy and sell orders that were submitted to the exchange after the previous close and prior to the open.
By beancounter on Mar 11, 2008 | Reply
Generally the after-hours trading does determine a stock’s opening price.
I think WM might be an exception, though. It looks like the 1.60 trade was a one-time deal. Probably due to some kind of private agreement. Current after-hours bid/ask is in the 15-20 cent range.