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Why is it when the market opens at 9:30am, stock prices will sometimes open at a significantly higher or lower price than the pre-market trading price? Bear in mind this is in the absence of a company specific event or the economy at large.

Let me illustrate my confusion with an example: If in pre-market trading the price is hovering in a 10$~12$ range, when the market opens at 9:30am sharp, the price instantly jumps to 13$. Being a retail investor, it is technically impossible for me to get in at the last pre-market price of 12$ for example because it instantly changes.

Why and how? Thank you.

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  • When you say that the "pre-market trading price is hovering in a 10$~12$ range", does that refer to what the pre-market trades have been or that's what the maximum bid/ask range was?
    – Bob Baerker
    Commented Mar 10 at 14:26
  • I just looked on google finance at the graph of lowest price and highest price. But what is the difference between trades and bid/ask price?
    – ronald christenkkson
    Commented Mar 11 at 9:59
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    If it's an illiquid stock with a wide B/A and the last trade near the end of the pre-market was the high bid, an opening trade at the ask in the regular market would account for the jump. This is a possibility for your observation, but it is not an explanation that covers all possibilities. The most logical explanation for a jump at the open is a motivated buyer(s).
    – Bob Baerker
    Commented Mar 11 at 22:53

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The volatility you describe (10-20% swings in a matter of minutes) is unusual and suggests an illiquid stock. In this case, it is possible that orders placed for regular trading hours, and not fully accounted for in the pre-market, cause the price to jump at 9:30am.

Generally, there should not be large jumps -- e.g., if heavy demand for the stock is expected in regular trading hours, the pre-market price would already rise due to traders "front-running".

Retail investors are not barred from pre-market trading -- you can find a broker that allows this. However, you would likely find that there is no systematic advantage. If you tried to buy the stock at $12 or below, you might find that the small amount of liquidity available was already taken and there were no more shares at that price.

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