A wide open occurs when there is a large spread between bid and ask prices at the start of a trading session, but it usually corrects itself as more traders become active. Market makers and specialists help narrow the spread, making trading easier. Wide opens are not necessarily a cause for concern and usually cannot persist.
A wide open is an unusual spread between the bid and ask prices that can sometimes be seen at the beginning of a trading session. When a wide opening occurs, there is a disparity between the prices that people are willing to pay for commodities or securities and the prices at which people are willing to sell them. Wide opens can happen for a number of different reasons and usually correct as trading begins for the day and people become active on the trading floor and remote trading systems.
At the opening of the trading session, sometimes not many people have put in bid or ask prices, in which case a big open can occur due to the limited number of people involved. Once market makers and specialists start to kick in, the spread narrows as these traders are highly competitive and want to move businesses to do business for themselves, their clients or their employers. Their activity causes the bid and ask prices to move closer to each other, which makes trading easier.
Bid prices are the prices that people are willing to pay. The bid price is an offer made by someone looking to buy something on the trading floor, to see if anyone is interested in selling at that price. Rather, sales prices are prices that people are willing to sell at, and are thrown on the ground by people with products or values to offer to those who would like to sell them.
Once two merchants make an agreement with each other, the sale can be recorded and the merchants can move on to their next transactions. If there is a wide open, the trade may initially be slow because traders are unwilling to close the spread and make the trade move. They may also be waiting for the move from the larger traders who can have a bigger impact on activity because they are working in high volumes.
The presence of a wide open is not necessarily any kind of indicator or cause for concern, although people who track financial markets may take note of wide opens. Unusual patterns may also be periodically newsworthy, in which case financial reporters may discuss them in their columns or broadcasts. Since all parties involved have an interest in closing the spread in order to make deals, this temporary disparity generally cannot be persisted by the people on the trading floor.
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