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day trading: open print orders

Open print orders:

by Robert Hollander: Market Maker

Often times when day trading, you are sitting at your computer waiting to pounce on a stock to trade you will notice that the first five minutes and last five minutes of the trading day are often very volatile. Sometimes this is just normal stock trading volatility, other times it is because of opening or closing print orders.

In the case of an opening print order a market maker may have to buy stock for an institution. Let’s use MSFT as an example, the order to buy 500,000 shares of MSFT, “opening print.”

That means whatever the first print of the day is the market maker will be selling 500,000 shares of MSFT. These orders are very scary for market makers. If he starts buying the stock too early he runs the risk that someone out there has a larger opening sell order and pushes the stock down, causing substantial losses.

For example; say at 9:28 the market maker is long 400,000 shares out of the 500,000. His average price is $34. If the stock opens below $34 the market maker will lose money, but he still has 100,000 shares of “ammunition.” He needs to use it to hold the stock at $34, but does he have enough left?

Don’t forget if the stock opens at $33.75 or $33.80, he will lose .20-.25 on 400,000 shares that is $100,000-$125,000! On the flip side, if he is able to get the stock over $34 he will make a nice profit.

Usually the best way to buy or sell the opening print orders is to wait until the last possible seconds to “finish” the order. In the above example, the market maker probably would have waited until 9:29:30 to start buying the last 100,000 shares to complete the order.

The market maker has many tools available to help him with these types of orders including a myriad of different buttons. One of the buttons he may use is the “spray” button where he would be able take all of the stock up to a certain price lightning fast.

If he wants to try to hold a stock where it is, he can use the penny increment button, programming his own bid to buy a certain amount at one level and then moving him down one penny at a time.

This strategy is already effective when he is already long the stock for his order, and he just wants to keep the stock from falling. Picture it as playing defense.

Nowadays it is also common for firms to use algorithmic programs to complete those types of orders; limiting the risk to the firm they need to limit risk because although these orders are sometimes very lucrative they also have the potential to put a firm out of business.

For more trading tips like these visit us at www.keystonetradinggroup.com

  1. Adrian Levytsky
    May 29, 2009 at 6:19 pm

    Thanks for article – very informative.

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