I’ve been trading a few screens on a weekly basis through thinkorswim (TD Ameritrade). Backtests show that buying at next open significantly outperforms next close or average of high/low. So I’m trying to execute all my orders manually as close to the open as possible. I’ve been tracking my slippage relative to opening prices and while not terrible, I would like to improve it. I understand IB offers MOO (Market-on-open) orders and I’ve been thinking about trying that out. A lot of my trades are for small cap stocks with significant bid-ask spreads so I’m concerned about my executions being worse than the opening price. I found one blog online about IB MOO execution, but it’s from 2008 https://web.archive.org/web/20150112110359/http:/www.puppetmastertrading.com:80/blog/2008/08/01/execution-quality-at-the-open-close.
Questions for the community:
Do any other brokers besides IB offer Market on Open orders? What is your experience with them?
On IB, how closely do MOO orders fill relative to the official opening price, particularly for small cap stocks (<$1B)?
Is there any platform that automates screen trading? Each week I produce a table of the tickers to buy/sell and number of shares with either a limit price or MOO order.
While I can’t answer questions 1) and 2), I can answer question 3). Portfolio123 offers automated market-on-open orders through IB. Simply link your IB account to Portfolio123. You can then link any automated strategies to that account and set all your orders to be market-on-open. You can also input your trades manually quite easily. There are a number of other IB algorithms available too, depending on your IB account. (Personally, I have always gotten pretty good fills with the relative NBBO peg). We also support importing transactions from a spreadsheet. See especially https://www.portfolio123.com/doc/side_help_item.jsp?id=20, page 4. In addition, you can use the “BUY” button on top of screen results to place orders directly from a screen. The number of options we have for placing orders is quite wide.
If you want more information about all this, check out the following knowledge-base articles:
I know Fidelity supports Market-On-Open and Limit-On-Open orders, and I’m sure many other brokers do as well – they’re very common order types. Sometimes it’s listed under a TimeInForce or Duration order type field.
Well, MOO order types will fill at the official opening price (or partially fill if there’s insufficient quantity to cross against). But the key point to remember is that your MOO order may impact the official opening price. A MOO buy order, for example, may create an imbalance on the buy-side that can push the opening price higher. This Vanguard post illustrates this very nicely with some examples: Shining a light on opening auctions when trading ETFs. Even though the example pertains to an ETF, it applies the same to individual stocks.
As you can see it is pretty transparent and open to institutions. My guess is that for liquid funds any large imbalances get arbitraged away by institutions, savvy investors or market-makers. Also any such imbalances can still exist on the order book for a market order after the open can’t they? And then there is the bid/ask spread for any market orders place after the open.
I don’t think the Vanguard post presents much of an argument for/against an MOO order being better/worse than a market order placed soon after the open. Maybe they have made an argument for limit orders and against any type of market order but not much else, I think.