I'm bit puzzled when some stock halts, it opens at a wide gap down. How that vaccum is created? As I understand that there must be thousands of orders and millions of shares. How do they vanish at the instant when it opens? On several occasion, I wanted to short at few points lower than closing price, but it open gap down. Are there any sort of foul play in between when stock halts and open?? thanks.
I suggest you ask the good folks at ISLD how they handle the open after a halt. Seems to me some connected folks seem to have access to the ISLD book a few precious seconds before the rest of the world.
I dont understand what you are asking. If you are talking about a typical stock hlats on NYSE, it happens because of some significant news. It can gap up or down depending on the news, of course. When a news hits the market ( a bad news, let's say), there will be tons of sell orders, naturally. If the specialist can not handle the order orderly, he will halt the stock (order imbalance). A stock that is halted based on order imbalance can continue to trade on ECN's like SILD and ARCA....but if it halted because of NEWS PENDING, then the stock halts trading everywhere. Anyway, once the stock gets halted, the specialist will gather all the open orders, sets a "fair" price - somewhere below last trade - and then matches the orders and re-opens it at some price. Depending on what the news is, the stock will open up or down. Sometimes, its tricky...like GM last month. It started to tank based on accounting rumors....and then was halted with the new quote indicated $2 below last trade... When it re-opened, it opened UP $1 or whatever because the rumor was disputed by GM during the halt... or something to that effect. Suffice it to say, it opened higher than the last trade before the halt ( last was $51.50). I bought at at $52.30 and $51.50 during the downtrend... and when it got halted and showed $49 - 51, I dumped all my shares at $50 on ECN AFTER the hlat on NYSE. The stock opened UP at $52.50..and then second print was $53.50. It was NOT a good day.
Better discipline would have been to dump all my shares when it went lower after I bought at $52.30 instead of buying more at $51.50. never ever add to losing positions unless you know what you're doing...Bottom picking is not for everyone.
Back in '99 & '00 when halts were still worth playing I used to make some good money being the first to grab any available ISLD shares. I would look at nasdaqtrader.com to see what time the halt was going to end, then one minute before that just start clicking away. Orders are just rejected until the stock is open. Imagine...click click click click DING! It was like winning the lottery, often being able to turn around and sell them $5-10 higher. Those were the good ol' days....
Dustin....Explain waht you mean by your post...Dont you have to have the stock first before you can sell it (or vice versa)? That means you had to be able to get in ont he stock BEFORE the halt.
In my example I was buying stock on good news (back then there was such thing as good news). You could also do the same thing on the short side (on bad news) because there is no uptick rule after hours.
Right...so that means you had to be fast enough to buy the stock BEFORE the stock ripped for few $$$. How were you able to buy the stock before it had its run?
Usually there is some poor sap who isn't bright enough to watch his open orders (on ECN's only!) after the market is closed. Those are the shares you will be buying/shorting. So for example, LLTC is halted because MXIM is going to buy them. LLTC was halted at $27. The closest shares available on the ECN's are at $27.40. You know that this news will take the stock up to at least $30 so you will pay up to $28. You set up your software to buy on ISLD at $28. One minute before the stock is set to open you start clicking BUY. I'm talking fast clicking, like 2 times per second. When the stock opens there WAS (I dont know how well this works anymore) a good chance that you will get some shares within your price range. You just better be right about the direction of the stock