Has this ever happened to you?
You place your market order to sell XYZ at the opening price. However, your trade doesn’t execute until 9:32 a.m. ET, and by then, the price is lower than it was at the market open. What happened?
If you mark your order as a DAY order, many brokers will hold these orders until the markets open before routing them to the exchange. Even in this age of split-second transfers, it can still take a few minutes for an exchange to receive and queue your order. Therefore, your order gets filled a few minutes after the open.
The opening price for a stock is calculated by taking all the pre-market orders and setting a price that satisfies the greatest number of buyers and sellers (please read about Open Cross).That price then becomes the opening price. This is the reason why we often see gaps between yesterday’s closing price and today’s opening price.
So how do we tell our broker that we want to participate in the opening price by submitting our order prior to the open?
We use a different TIF (time in force) designation for our order
Here’s an example of an order to sell 100 shares of MSFT at the open with Interactive Brokers. Notice that instead of using DAY, we use OPG.
An OPG order will be accepted if it is received by the exchange before 9:15 AM (ET). The order can be canceled after 9:15 AM, but it cannot be edited. After 9:28 AM, OPG orders cannot be edited or canceled. If you are placing your trades the evening before, you should have no problems here.
Now keep in mind that if you use a LIMIT order with an OPG, if the order isn’t filled on the open, it will be canceled. So for those portfolios that use LIMIT orders to exit positions, do not use the OPG designation. Use DAY instead.
For an overview of the different order types used in Quantitrader, click here.
There are no guarantees in life or trading. But by using the OPG designation for your market exits, you will find that your fills will more accurately reflect a stock’s opening price. And your number of bad fills will greatly decrease.
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