If you are talking big cap stocks, say those that trade $100mil+ per day, and you generally buy on the open, at what stage will your order start influencing the opening price ? Say if this stock has $100mil money flow per day average, and does about $5million on the open. If your order is $500k will you influence the opening price? How about $250k? Any thoughts/comments/discussion is appreciated. Thanks. Nizar.
1) It would depend on size, price position and order type. 2) Stop orders would likely be de-stabilizing. Limit orders can be stabilizing. 3) "Larger" orders placed close enough to or within the opening range can have an "impact". 4) Avoid lower-volume stocks where there's greater likelihood that an order can be "mishandled".
Hi. Thanks for your response. 1. I would use limit-on-open orders; so should execute right at the open. 2. See 1. 3. What is a "larger" order ? 4. Yes of course thats why I said high volume/liquidity stocks. For example, say, I was trading LINTA and there was about $5million worth of orders at the market depth at the pre-open, a few seconds before the opening bell. I need to figure out what dollar amount my order needs to be below, roughly, to buy the open if my limit price was hit. But it needs to be so that it would have opened at this price anyway (if my order wasn't there). Would a $200k order be okay? $500k would obviously move the price?? (If im influencing the opening price then obviously i need to scale down my size or else all my backtesting would have been useless) Any thoughts?? Thanks.
1) Okay. Ideally, your entire order is filled. 2) Okay 3) A "larger" order would be 3% to 5% of average daily volume. That's more relevant after the open. 4) You said "big cap stocks", not "high volume/liquidity" stocks. Nevermind. 5) Instead of talking about the dollar-value of orders, focus on the number of shares of the order instead. 6) Regarding your LINTA example, what order size should you use so that you get filled without "disturbing" the opening range?......well, the answer is, "it depends". It depends on the amount of "imbalance" and variation from yesterday's close.......... a) Is the market opening ~unchanged with ~100,000 shares, probably in a "narrow" range? Well, your order, as long as it's not too "big", should be filled close to "unchanged" from yesterday. b) Has there been bearish news and the market is opening with ~500,00 shares, 40-cents to 50-cents lower? Well, in that case, a "small" order should get filled 49 cents lower. A "larger" order may be enough to support" the market 45-cents lower and absorb a lot of selling imbalance in the expected opening range. c) Generally, the market "seeks" a price that maximizes volume while minimizing the share imbalance on the open. 7) It's okay to "influence" prices. It means that your "research" and opinion have more significance.