Spikes and Plunges at Market Open?

[kmiklas]

Why do these big spikes and plunges occur at market open?

We saw one today (7/19/2021) on SPY. A sharp plunge right at the open. For a day-trader, there is no time to react. What causes these extremely sharp movements?

- Orders placed out-of-hours?
- Market-On-Open (MOO), Limit-On-Open (LOO) and the like?
- Result of dark pool reporting?

I'm trying to increase my understanding of what causes these sharp increases and decreases at the open.

Is it safe to say that keeping positions overnight carries a high level of risk? That out-of-hours surprises can cause these sharp movements?

Thanks,
Keith

 

[SunTrader]

Globex futures were down bigly overnight.

Haven't you ever heard "Money never sleeps"?

RTH open began with stocks/etf's being sold and futures being bought to try to bring about some equilibrium between the two.

 

[SunTrader]

Forgot to add the obvious, once a little equilibrium between cash and futures takes place, the prior trend from overnight, most times if it strong enough like today, resumes.

 

[VicBee]

Why do these big spikes and plunges occur at market open?

We saw one today (7/19/2021) on SPY. A sharp plunge right at the open. For a day-trader, there is no time to react. What causes these extremely sharp movements?

- Orders placed out-of-hours?
- Market-On-Open (MOO), Limit-On-Open (LOO) and the like?
- Result of dark pool reporting?

I'm trying to increase my understanding of what causes these sharp increases and decreases at the open.

Is it safe to say that keeping positions overnight carries a high level of risk? That out-of-hours surprises can cause these sharp movements?

Thanks,
Keith

As far as I know these are adjustments to prior day's after market and early morning pre market trades and, like you say, are moving too fast to join.

BABA is a well known stock to gap up or down significantly after market and seems like the share price readjusts during market hours, which makes no sense.

 

[maxinger]

Why do these big spikes and plunges occur at market open?

We saw one today (7/19/2021) on SPY. A sharp plunge right at the open. For a day-trader, there is no time to react. What causes these extremely sharp movements?

- Orders placed out-of-hours?
- Market-On-Open (MOO), Limit-On-Open (LOO) and the like?
- Result of dark pool reporting?

I'm trying to increase my understanding of what causes these sharp increases and decreases at the open.

Is it safe to say that keeping positions overnight carries a high level of risk? That out-of-hours surprises can cause these sharp movements?

Thanks,
Keith

on 19 Jul, when the US stock market opened and
on 19 Jul when the CME exchange opened,

there were no spikes and plunges on ES futures.

The spider only opens during the US session and for a few hours a day.
You can trade ES futures which is open almost 24 hours.

 

[ThinkOrSwim Ranger]

Everything is very simple. The exchange accumulates all orders before the market opens (large interested players). Then the exchange compares supply and demand. If the demand is greater, there may be a gap at the opening upwards, if the supply is greater, there may be a gap down. Therefore, the opening price is almost never equal to the closing price of yesterday's trading session. And because of this, the price rises or falls so rapidly - because in the first seconds thousands of orders begin to be triggered.

 

[Smilingtrader]

Everything is very simple. The exchange accumulates all orders before the market opens (large interested players). Then the exchange compares supply and demand. If the demand is greater, there may be a gap at the opening upwards, if the supply is greater, there may be a gap down. Therefore, the opening price is almost never equal to the closing price of yesterday's trading session. And because of this, the price rises or falls so rapidly - because in the first seconds thousands of orders begin to be triggered.

Everything is correct. These applications are called market on open applications. And they are distributed at different prices, for example - yesterday's share price is $ 10, and orders are for the purchase of $ 6, 7, 8.45, 9 and for the sale of $ 10.45, 11, 11.15. This is how the average open price is plotted. And depending on the number of applications, a gap may be formed.