NYSE Specialists can only absorb, according to generally accepted hear say, the true opening round interest in each stock that is worthy of their attention. All additional interest is presummed to reaappear during the normal trading session as a limit or market order, so there is/are no worries that those spurned during the OPG/MOO round will be offended that their orders are/were not selected for filling. At the posts, the Primary Specialist handles the most volatile stock or stocks of those assigned to his company and to his authority / rank within his partnership. The next runner up or junior specialists handle the other stocks assigned and these open in the first wave of stocks. They then, in prearranged fashion successively tranch their way through all their assigned stocks at that post. In the few minutes before the generally accepted 9:30am opening, all facts that need to be considered are available to these Specs in order for them to mentally know where they intend to value and open each stock. One of those factors are designated interest. Part of that designated interest are: 1) crowds at the post 2) news from the CEO, CFO or other "C" level executives 3) pubic, economic or political news or sector news like earnings or downgrades 4) OPG and MOO Buy order and Sell Short order interest in the underlying 5) other factors and proprietary trading experiences If the Spec realizes that 200,000 shares are needed to balance pre-opening interest and he's not willing ot trade this from his reserve then he (might) assign it to, say all present OPG/MOO orders. Here's where these orders plays a role. If he has net 400,000 OPG/MOO interest, then some get executed and most do not. If he uses price as a basis, then those orders closest to his mentally designated price will be filled. If these orders are away from that price, then he will decide at what cut off he will fill this over interest. He also decides whether to fill these orders Short into a potentially rising day thus saving his reserve for the rally or the inverse selloff. Those selected for fill are, as they say, trading on the side of the specialist. The presumption is that it is an edge. The example of the trader (scroll up just last week on this thread) who got creamed over -$7,000 on the HMO stocks shows that this edge is used exclusively for the Spec's benefit and his reserve in the stock and not always in behalf of the trader. -------- There are other factors that go on during the premarket preparation for the opening or re-opening for a stock but those factors stated provides a very good estimate of the inner workings of the process. ------ some other factors that provide / presume to provide an edge a) find stocks that are not primary attention stocks at each post b) get second, third and forth tier stocks and widen out your selected stocks to well over 200 or 400 daily c) get stocks that are not prime components used in other indexes d) avoid news or story stocks however with this understand that successively lower and lower net volume can be absorbed in these "non-primary" stocks. So some large size (4,000 share and 10,000 share and 20,000 share spread traders) will easily overwhelm the natural interest in the opening round. When this happens then all these OPG/MOO orders becomes its own market moving participation factor thus providing the Specialist with a near zero risk free trade, of which he can or then uses to his firm's advantage, and not necessarily to the benefit of the trader. This is when you're not trading on the side of the specialist but being traded by the specialist for his benefit. That's when your losses overwhelm all or most previous days/weeks/month's gains. one other factor, is the amount of traders participating in this and similar strategy, even using automation to help them manage hundreds of OPG stocks has irreparably changed the game, as well as in many cases over whelmed the Spec's posts with too many orders or too much interest.
NASD traders already see in an active auction session what the Fair value or real value of an equity is, will be (upon opening bell) in the premarket and price reflects all the interest that is represented at that time. The volatility and irrational (wild or calm) swings of, say GOOG after earnings or (relative calmness of) KLAC, QCOM, QLGC or other stocks accounts for those swings as the stock balances interest in the premarket with participation. At the opening, a natural gap that occurs represents all the pre/post market trades as contrasted to prior day's closing price. Now, you have participation coming from: 1) normal trading hour interest 2) gap theory traders 3) other traders who don't have access to pre/post market trades 4) foreign account's interest being executed through the Market Makers or other Institutional desks 5) mutual fund, hedge fund and other group interest traders Due to the absence of the Specialist in the equation the OPG (in NASD stocks) doesn't have the same bang as it does for NYSE stocks, hence this strategy works but to a much more limited degree, almost to the point where many conclude it doesn't work at all on NASD stocks. --- Danjos, its not hard to see the facts of your comment, whereby more NASD traders are net consistently successful than NYSE only traders, especially where OPG's are concerned.
Great job MK. I was just wondering. I joined a place where I can do the same kind of large volume at low cost. But my training manual may have a typo. It states that NYSE costs .50 per 1000 shares....but thats actually free now. It also says that ARCA is free to add liquidity, but costs $1 per 1,000 shares to remove liquidity. This is with respect to NYSE. With respect to Nasdaq, adding liquidity on ARCA is $2 per 1,000 shares. (rebate) Is this correct, or am I missing something?
That's all correct but you are missing something. Mk was trading an AMEX stock through ARCA which pays 2$/1000 rebate for adding liquidity... (same fee structure on ARCA for AMEX and Nasdaq) mnx
ECN cost structures and rebates were discussed in earlier posts, please refer to those for the appropriate numbers.
I am done today as well. I am not happy with my focus lately. I find myself snoozing off into playing online poker more and more than I would like. Damn internet poker! lol Im taking the family to the mall for some carousel rides for my daughter, have a good day everyone.
i will join the crew and take off early today as well. nothing on opening orders, yet was able to grind some on mid-day trading. DT, I put up your recent scan on TradeIdeas and pulled a little out of SYNX. I got him at 5.45 on very small size, then averaged up. Filter looks good and makes sense especially in a bullish market environment. thanks. patrick
thought I'd join in the fun today... i might be done early also (not by choice) (half of you guys know what I'm talking about, wink wink) mnx
Im in the same boat as mnx.... Luckly for my sanity i did very well pre 2pm and managed to net 128 still. I could have had 200 by the end of the day i bet, and that really would have been great as i need 565 this week, but oh well..... THat lowers what i need to about 110 per day for the rest of the week, hopefully shit is fixed for tommorow so i dont have to freak out!