Opening-only limits and priced exits

The first print as an order-type drill

Editorial note: TradersWeek treats the first print as an order-type drill. The archive workflow is to join the opening imbalance with an opening-only limit, then read time-and-sales rather than the advertised book before unwinding with a priced limit instead of a market order.

An opening-only order works solely in the opening auction and does not remain live afterward. That opening-only participation is meant to stand on the same side as the specialist accommodating the imbalance, and is described as aligning the trader with the specialist, who can only accommodate the opening imbalance.

Read time-and-sales, not the advertised book

In a high-volume large-cap, time-and-sales can show 100,000 or more shares printing at a price while the quote advertises no more than 300 on either side. A 2,000-share unwind need not wait for matching displayed size.

A few-thousand-share clip in those names is treated as coming in under the radar relative to ordinary advertised depth.

Exit on a priced limit

A market order is an unpriced instruction generally avoided on exit because only the specialist can match it at certain prices, which can delay the fill. Market orders are generally avoided on exit for that reason, which may introduce a time delay.

A limit order is a priced buy or sell used to exit or to rest away from the last print so the order can improve to the best available price. A sell limit placed below the bid, or a buy limit placed above the offer, is used so the order can receive price improvement to the best price available at that second.

Price improvement is receiving a better print than the resting limit when hidden or auction liquidity is available at that second.

Enveloping after the open

After the open, the same away-from-the-last-sale pairing is applied as enveloping: simultaneous buy and sell limits posted off the last print to capture listed trade-throughs. A trade-through is a print that crosses a resting price standing away from the displayed quote.

Enveloping requires canceling when the bid or offer creeps to the resting price and seeking fills mainly on a 10-to-25-cent dislocation from the prior quote.

Size is not added more than a couple of times in the same direction while a name is troughing in a range. Manual enveloping is treated as workable on only one or two names at a time, and automation is deferred until a high manual success rate is achieved.