Are there any strategies, indicators, or calculations that assist in forecasting the opening price of an listed stock?
Forecasting Opening Price
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More specifically, I am interested in strategies for trading the overnight gap.
spec..
thats a great question for Don Bright, his firm specializes in listed.. to my knowlege (limited) you can get a bloomberg terminal that will give you an idea where the specialist intends to open the stock.. or, you could grab a calculator and figure out what the stock price should be in correlation to fair value of the S&P or DOW futures..
strategies.. well, let the stock open.. and then mark the high and low of its first 5 minuites trading.. when it breaks the high, go long or if it breaks the low, go short.. or sometimes specialists have an interest in the opening print, so they exagerate the move a little.. say xyz has a 100k share sell imbalance at the open.. the specialist will have to step in and buy those 100k shares if there are no other buyers.. so, since he sets the open price himself, he is more apt to give himself a little room by opening the stock lower than is needed so he can raise the price after the open and attempt to sell the shares.. in this case you would use an open only order to participate with the specialist in the opening print.. then you would attempt to sell the shares for a small gain once the stock moves up.. the opposite applies on a gap up..
just a few ideas.. i dont trade listed stocks (once or twice a month) so like i said, its better to ask Don since he teaches this stuff..
-qwik
thats a great question for Don Bright, his firm specializes in listed.. to my knowlege (limited) you can get a bloomberg terminal that will give you an idea where the specialist intends to open the stock.. or, you could grab a calculator and figure out what the stock price should be in correlation to fair value of the S&P or DOW futures..
strategies.. well, let the stock open.. and then mark the high and low of its first 5 minuites trading.. when it breaks the high, go long or if it breaks the low, go short.. or sometimes specialists have an interest in the opening print, so they exagerate the move a little.. say xyz has a 100k share sell imbalance at the open.. the specialist will have to step in and buy those 100k shares if there are no other buyers.. so, since he sets the open price himself, he is more apt to give himself a little room by opening the stock lower than is needed so he can raise the price after the open and attempt to sell the shares.. in this case you would use an open only order to participate with the specialist in the opening print.. then you would attempt to sell the shares for a small gain once the stock moves up.. the opposite applies on a gap up..
just a few ideas.. i dont trade listed stocks (once or twice a month) so like i said, its better to ask Don since he teaches this stuff..
-qwik
I just want to add to what Qwiktrade said. It's also possible to determine the shorterm trend of the day by looking at the open. Check out high/low in the open. Watch how the morning trades. If the first hour/hour half is below this 5 min open price range, then the short term trend is down and vice versa. Then you simply trade with the short term trend: only go long or only go short. The idea is that it is safer to trade with the short term trend rather than against. It improves the risk/reward ratio. Hope that made sense.
First off, let's think about this for a minute..just the name "opening GAP" ...How and when do we know if there is going to be a "gap" and would we want to play it, and if so, how. (I have a great knack for repeating the obvious, don't I?)...
Since we want to be on the same side (buy or sell) as the Specialist on the opening, we place buy and sell orders based on fair value calculations, modified for opening indications disseminated by the Post in NY. Since the orders are "opening only" if we don't get filled, then we have not risked anything, and if we do get filled, we are generally on the same side as the Specialist. We try to teach our traders the rules involved in trading prior to them "pointing and clicking" their way to poverty, and a big part of this training is in understanding how the game is played. The Specialist can only "accomodate" not "participate" on the openings (there a couple of exceptions, as in anything), and the Specialist must let the Regionals know (and us) if the stock is going to open more than a certain amount (I believe around 35cents, don't hold me to that exact number). He will try to find some "help" in this accomodation prior to the opening, and we are happy to oblige since we know that he will open the stocks as high or as low as possible to insure that he will not get "caught" in another move after the opening. I hope this helps.
Since we want to be on the same side (buy or sell) as the Specialist on the opening, we place buy and sell orders based on fair value calculations, modified for opening indications disseminated by the Post in NY. Since the orders are "opening only" if we don't get filled, then we have not risked anything, and if we do get filled, we are generally on the same side as the Specialist. We try to teach our traders the rules involved in trading prior to them "pointing and clicking" their way to poverty, and a big part of this training is in understanding how the game is played. The Specialist can only "accomodate" not "participate" on the openings (there a couple of exceptions, as in anything), and the Specialist must let the Regionals know (and us) if the stock is going to open more than a certain amount (I believe around 35cents, don't hold me to that exact number). He will try to find some "help" in this accomodation prior to the opening, and we are happy to oblige since we know that he will open the stocks as high or as low as possible to insure that he will not get "caught" in another move after the opening. I hope this helps.Quick question here, is there any way I can get the open indication besides the Bloomberg?
A great example would be the oil sell-off this week, would have been awesome if I had all the bullets ready and sold stuff off the open print that gapped down least, many of those gapped down half a point or more. I think if you are playing news, this is almost a must . . .
A great example would be the oil sell-off this week, would have been awesome if I had all the bullets ready and sold stuff off the open print that gapped down least, many of those gapped down half a point or more. I think if you are playing news, this is almost a must . . .
Opening indications are transmitted to regional exchanges and are of course on RediPlus.