Halal Investment Series Part 5
The open and close stock price is an important metric for investors. The previous close refers to the previous day’s final price of a security when the market officially closes for the day. Open refers to the price of the stock at the beginning of the day. For instance, the NASDAQ and the NYSE are both open from 9:30 AM to 4:00 PM EST, Monday through Friday.
The listed closing price is the last price anyone paid for a share of that stock during the exchange’s business hours. The major US exchanges are usually open from 9:30 a.m. to 4:00 p.m. Eastern time. The closing price is simply a snapshot of the stock as of 4 p.m.
This price carries much psychological weight. It’s frequently interpreted as the market’s “final say” on a stock for the day. But it’s no different than any other price at any other time of day. The exchange does not place a label on a shelf that locks in the price until 9:30 a.m. the following morning.
After Hours Price
After-hours are not included in the open and close stock price. Stock trading continues even after exchanges close. Investors can place buy and sell orders “after hours.” These orders are either filled immediately or queued up to be filled when the market opens, depending on the system. These trades will have an impact on the next day’s opening price.
Meanwhile, investors are keeping an eye out for news and events that may impact stock prices. Many companies, for example, postpone significant announcements until after the markets have closed. If they announce good news, such as a strong earnings season, people will be willing to pay more for the stock in the morning, whereas if they report bad news, prices will frequently fall.
The opening price is the price paid in the first transaction of a business day, just as the closing price is the price paid in the last trade of a business day. Anything that has occurred since the previous close can have an impact on that price.
Consider a company whose stock closes at $40 per share one day. That night, it is revealed that the company committed massive accounting fraud and is in dire financial straits. When the market reopens the next day, no one will pay $40 per share for the stock because it isn’t worth that much. If the highest price anyone is willing to pay for a share is $4, the stock will open at $4.
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