Basically my question is what is the cost of a MOC order (market) if it is .20(bid) * .30(ask) you can say the actually "price" is .25 and if both sides argree to use MOC orders you'll get filled @ .25 so the cost is 0. However is this a cost to be concerned with?... Saying to all the Insiders "HEY I'M GOING TO BE USING A BUY MARKET ORDER in 20 minutes" ---> so you have time ahead to take advantage of it. Of course this depends on the average daily volume of the stock, but I'm wondering if at times if you are try to exit a fairly large position and the stock doesn't do too heavy of volume to just try to hit the bid. ~I address this because I was $250,000 short this stock that does 500,000 avg dailiy vol, I sent an order MOC to buy @250,000 and the price jumped 10 cents on a $60 stock. Perhaps I should have tried to slowly scale out in order to minimize slippage Opinions?
My experience with MOC orders has not been good at all. A market order at the close, just as a market order right at the open, can be caught in rapid price movements that open the spreads and fill you at less than desirable levels. MOC really just puts you at the mercy of the market, and if you are trading decent size you may often get wacked badly. In your case, .10 on a 60 dollar stock is really nothing compared to what could have happened.
MOC orders have been pretty tough. lately it seems as though it is giving the market a license to steal from you. if you use market orders in general for your exits, I guess it is as good a time as any to do so. If your commissions are on a per share basis, I would say scale out of at least some of the position yourself and save a fraction for the MOC. I can't even think of a reason why I would put an MOC order in prior to the last few minutes of the session. (maybe if I was up big on a position, thinking it would keep coming my way, and I was getting tickitis?) There are a lot of big players with their own agendas that last half hour. why show your hand too early?
If you have a sizable position relative to the average volume of the stock, you can expect there to be a cost to moc. 10 cents on a $60 stock is not uncommon. I execute dozens of moc orders almost every day and compare my pl right at the close with where things settle. 9/10 times it costs me money. However if I were to try to execute all those orders right at the close, it'd cost me even more in slippage. The price you see is not necessarily the price you can get. If you have only one order to execute, work the bid or ask and try to split the spread, maybe earn a bit of an ecn credit to boot. If you have many positions, moc is a simple way to get flat, but you'll pay for that benefit. Using some kind of algorithmic exit would be best, but that takes some work.
No, if there is no imbalance, MOC/LOC orders will be paired-off at he last sale price. If there is imbalance, the specialist will stop the imbalance and then pair-off MOC/LOC orders. So someone will pay the spread. Based on my observation, big buys usually play against MOC/LOC orders imbalance, especially when there is an active player on the other side. For example, a buyer just places a size limit buy order around 15:59:55, and get hits from all sellers that still want to dump size, and then take the sell imbalance without paying any spread. Just look at the tape 30 seconds before the close, and you'll the the action - every print, every quote. It's self-explanatory.
thanks for the explanation. Normally I have 20-30 positions I exit out at / near the close. By edge per position if I were to get filled on EVERY limit order and Pay NO comissions is about .25% which is about 12.5 cents on a $50 stock- comm & other costs. I can't be giving away dimes like that especially when my edge is probably < a dime. - for the life of the strategy I'd exit like you say "working the bid/ask" This week I exited using MOC's and I'm now just looking at the results... ---> I'm changing back to the regular Thank you