What is an opening price? Definition and meaning
An opening price is the price of a security when it is first available to be exchanged (which occurs as soon as the exchange it’s on opens).
It is a good indicator for people interested in making short-term trades, as a security’s opening price can help determine trading activity for the day.
In addition, it is a useful tool to measure swings in value for securities that have significant intra-day gains and losses.
A security’s opening price will not always be the same as its closing price, this can be due to after-hours trading or changes in investor valuations.
Acccording to Cambridge Dictionaries Online, the opening price is:
“The price for a share, bond, etc. at the beginning of a day of trading on a stock market.”
Opening price in an IPO
In an initial public offering (IPO), when a company goes public, people who bought at the offer price may try and sell their share at the opening of the market.
The underwriter of the IPO shares tries to set the offer price at a level so that the share price will trade at a higher value as soon as they hit the open stock market.
If the IPO has gone as planned, the opening price will be higher than the offer price.