Open: What It Means, How It Works, and Types

Definition

In financial markets, “open” refers to either:
* the start of the trading period on an exchange (when orders become active), or
* an order that remains active until it is executed, canceled, or expires.

Market open

The market open marks the beginning of the trading day and is often associated with an official opening price. Key points:
* The opening price may be the first executed trade of the day, but some venues use a short pre-opening auction or price-sampling process to determine an official open.
* Because of overnight news and supply/demand shifts, the opening price frequently differs from the previous day’s close.
* Opening times vary by exchange. For example, the NYSE and Nasdaq open at 9:30 a.m. Eastern Time; other venues (such as futures exchanges) may open earlier or follow different schedules.

Why it matters:
* The open can set the tone for intraday trading and is often a high-volume period as traders react to overnight developments.
* Pre-open mechanisms aim to concentrate liquidity and establish a fair opening price, especially for thinly traded securities.

Open orders

An order is “open” while it remains active in the market. Common reasons an order stays open:
* Conditional order types — for example:
* Limit orders execute only at a specified price or better.
* Stop orders become market orders only after a trigger price is reached.
* Lack of liquidity — if there are no matching bids or offers, the order cannot execute.
* Time-in-force settings — orders may be set to remain open until canceled (GTC) or for a specified period.

Practical implications:
* Open orders allow traders to target entry or exit prices without constantly monitoring the market, but they carry the risk of non-execution or partial fills.
* Conditional orders can protect against unfavorable fills but may miss fast-moving opportunities.

Open interest

In derivatives markets, “open interest” is the total number of outstanding (unsettled) futures or options contracts at a given time.
* Unlike shares outstanding (set by the issuing company), open interest constantly changes as traders open and close positions.
* Rising open interest during a price trend often indicates new money entering the market and can confirm the trend’s strength. Declining open interest may signal profit-taking or positions being closed.

Why traders watch it:
* Open interest provides insight into market participation and conviction behind price moves, helping traders interpret momentum and potential reversals.

Summary

“Open” has distinct but related meanings in finance: the start of trading, the state of an active order, and the count of outstanding derivatives contracts. Understanding each usage—how opening prices are formed, why orders remain open, and what open interest reveals—helps traders and investors interpret market action and make informed decisions.