how do the specialists handle opening price and price improvement?

Quote from Don Bright:

Dustin has a good point, and I might add that if the stock were to open real close to the previous day's closing price, you probably won't want to "play" - since the Specialist may not be "playing" - the ordes were matched up closely...more of a "coin toss."

The "Prime Directive" of the whole strategy is to be "on the same side as the Specialist" - right...??

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I think I will buy the CD as well...I don't want to be a "cheap bastard"....LOL

Back to work..

Don:)
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Don , I have a related question regarding opening prices and indications.
If for example a stock indicates premarket @ 27 x 27.50 with the previous day's close at 27, does this indicate that the specialist is likely to open the stock higher? Also, once 2 companies announce a merger, does this mean that there will be only one specialist handling both company's stocks after the announcement?
Thanks in advance.
 
Quote from tito:

Don , I have a related question regarding opening prices and indications.
If for example a stock indicates premarket @ 27 x 27.50 with the previous day's close at 27, does this indicate that the specialist is likely to open the stock higher? Also, once 2 companies announce a merger, does this mean that there will be only one specialist handling both company's stocks after the announcement?
Thanks in advance.
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Hi Tito...

1. He is indicating that the opening price will likely be up from the previous close, and at the same time he is looking for sellers in that price range. Track your stocks to see how the actual openings relate to the pre-open indications.

2. The change in Specialist posts takes place after the merger or acquisition is completed. Often times the Specialist for the "buying" company will keep the stock at their post. Between merger announcement and completion, the same specialists will trade the individual stocks.

Hope this helps,

Don
 
I apologize if this is off topic slightly but I have a similar question about the opening price myself. To illustrate my question let me use the stock RRC on 1/4/05. On 1/4/05 the opening price is listed at 27.60.

Now if I look at the time and sales the first orders I see are two 500 share lots traded at 9:35:46 at the price of 27.60. Next I see one 400 share lot which traded for 27.90 at 9:36:49 and then also at 9:36:49 I see at 52,000 share lot which traded at 28.00.

My question is if I place a market order to sell at the open where will I get executed? Will I get executed at the listed open price of $27.60 or will my shares trade in the big 52,000 lot at $28.00. I'm assuming it's the later based on my common sense but any explanation of what is going on here would be much appreciated.

Thank you!
 
If you place a market order to sell at the open, you will be entitled to an execution at the price at which the security opens on the exchange receiving your order, BUT your sell (buy) order might cause that opening price to be lower (higher) if your order size is sufficiently large compared to the orders also eligible for execution on the open.

The specialist is obligated to choose the opening price, based on all the available orders to buy and sell at market or at various limit prices, which will maximize the number of shares traded on the opening print. If you submit a sell order, you might tip the balance so as to make the opening print somewhat lower than it would have been otherwise. This is unlikely for liquid stocks, if you are a small trader, but for illiquid stocks, in which the opening print is only a few hundred shares, then your order to sell just 100 shares can alter the opening price. Same if you buy 100 on the open.
 
jftrader those little trades are on ECN's and have nothing to do with the NY open print. The 58k trade was the open print and if you offered stock lower than that, or offered to buy above that price then you would have been included at the $58 trade.

I suggest having T&S like my pic so you can see the market the trades are going through.
 

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Quote from Dustin:

jftrader those little trades are on ECN's and have nothing to do with the NY open print. The 58k trade was the open print and if you offered stock lower than that, or offered to buy above that price then you would have been included at the $58 trade.

I suggest having T&S like my pic so you can see the market the trades are going through.
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Not that he needs it, but Dustin has the right right answer. I filter out all non NYSE trades when looking for proper pricing on my Time and Sales montage.

All the best,

Don
 
That clears up a lot of confusion for me...thank you to those who responded. I do have another question though. Do NASDAQ stocks work differently when it comes to the opening price? I'm looking at some time and sales sheets for various stocks and I don't seem to see any large block trades at the open like I do on the NYSE. I see more smaller lots at varying price points.

Thanks again for the help!
 
Quote from jftrader:

That clears up a lot of confusion for me...thank you to those who responded. I do have another question though. Do NASDAQ stocks work differently when it comes to the opening price? I'm looking at some time and sales sheets for various stocks and I don't seem to see any large block trades at the open like I do on the NYSE. I see more smaller lots at varying price points.

Thanks again for the help!
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The nasdaq has historically not had "opening only" orders (since there was no "opening"). And since there are multiple market centers (and market makers), there is no single place to send the orders for price determination. As noted above, however, they are establishing an opening price now, and hopefully will move towards a single market place for the openings.

I will check today about the openings of OTC coming up.

Don
 
Quote from Don Bright:

Hi Tito...

1. He is indicating that the opening price will likely be up from the previous close, and at the same time he is looking for sellers in that price range. Track your stocks to see how the actual openings relate to the pre-open indications.

Hope this helps,

Don
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Another question regarding indications, Don, if I may.
If a specialist indicates a higher opening for a stock, is he obligated to actually open the stock higher?
For example, indications for a stock pre-market is 35 x 35.50
and the previous day's close was 34.80. Does the specialist have to open the stock at a price within his indication-in this instance between 35 and 35.50?
Thanks again in advance.
 
Quote from tito:

Another question regarding indications, Don, if I may.
If a specialist indicates a higher opening for a stock, is he obligated to actually open the stock higher?
For example, indications for a stock pre-market is 35 x 35.50
and the previous day's close was 34.80. Does the specialist have to open the stock at a price within his indication-in this instance between 35 and 35.50?
Thanks again in advance.
More...

He doesn't "have" to for a couple of reasons. First, he may receive a large sell order at the last second thus changing the opening price. Second, he is actually "asking" for help from traders and institutions and may get several responses which may affect the price as well.

He will likely open the stock within the range indicated, and remember, he can change that indication quite often prior to the stock actually opens.

Don
 
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