At the Open Order
An at the open order is an advanced order type available to both traders and investors alike.
Much as we wrote about in a previous article on an At the Close Order, this order type can be placed prior to the daily regular trading session begins, or even the night before.***ad3rdparagraphctr.shtml***
When placing an At the Open Order, you'll be able to enter it as either a "Market" order or a "Limit" order, each with it's own pro's and con's.
Examples of an "At-the-Open" Order
As a first example, if entering a "Market, At-the-Open" order to buy 1000 shares of a stock with a symbol of MMSM (fictious symbol for fictious company "Make Me Some Money"), the order would be placed in line with other similar At-the-Open Market orders and executed and the first, "best price" available. This doesn't mean your order is first in line though. If there are other market orders to buy a cumulative total of 100,000 shares, you could theoretically get filled at a price you weren't expecting to have been.
For another example, if entering a "Limit, At-the-Open" order to buy 1000 shares of MMSM with a limit of $10.90, your order would be filled as long as shares were available to purchase at $10.90 or below, at-the-open. If MMSM opens at $10.95 and begins to move higher, your order would not be filled and it would get cancelled.
Pro's (Benefits) of Using An "At the Open" Order Type
- You can use this type of order to enter or exit positions while working a 9-5 career job away from your trading program.
- Can be used as part of a trading system designed to enter or exit positions the day after a stock meets pre-determined criteria.
- By using a system combined with an At-the-Open order you can help remove some of the emotions involved with watching live stock price movements and the effects of those movements on your decision-making process.
- Some people use this type of order as part of their stop loss strategy. IE: if a stock triggers a stop loss criteria, exit the following morning at-the-open (no, if's, and's or but's about it).
Con's (Pitfalls) of Using An At-the-Open Order Type
- You could miss out on opportunities if a stock price opens higher than a limit price you set.
- During extremely volatile trading, a market, at-the-open order may get filled at a price much higher than expected.
- If a stock closed one day at $20.00 and you enter a market order to buy shares of that stock the following day at-the-open and are not around to see what's going on in the news, a negative announcement can come out and the stock could open down 30% or more, and you would now own shares of a stock that you might not have wanted to own if you knew about this new, negative news, no matter what the price.
- If a stock closes at $20.00 as in the previous point, and you enter a "limit, at-the-open" order with a limit price of $20.20, you could get filled if shares were available only to find that negative news was announced shortly AFTER the open, causing shares to dive and you not be around. (Note: You could make this more of an advanced order type to try and help prevent things like this by making this a "conditional, at-the-open-limit order". More on this in another article).