Why does FTSE often move 10-15 points at market close?

[MrBrilliant]

I sometimes trade daily FTSE options, and I've noticed that quite often, FTSE will make sharp 10-15 point movements, in the last few minutes of trading -- sometimes in the period of time after the "official" close of 16:30 but before the closing price is officially settled.

Is there any reason or pattern for this? Does it happen based on particular events?

I'm just trying to understand it so that I can predict it better; at the moment I close all of my positions 5 minutes before market close and often end up paying a spread that I might be able to avoid if I knew whether or not to expect a price jump.

 

[f2calv]

Adjustments when stocks go ex-dividend

 

[MrBrilliant]

Closing auction

Thanks, but why does the closing auction change the price so much? Basically why are people willing to pay so much more or less for something that had a different price 5 minutes ago?

 

[postman]

Thanks, but why does the closing auction change the price so much? Basically why are people willing to pay so much more or less for something that had a different price 5 minutes ago?

Who cares why? Just find a way of making money from it.

 

[MrBrilliant]

Who cares why? Just find a way of making money from it.

That's what I'm trying to do mate, I'm thinking that understanding the underlying mechanism could potentially be useful in making money from it.

So, I care why!

 

[postman]

That's what I'm trying to do mate, I'm thinking that understanding the underlying mechanism could potentially be useful in making money from it.

So, I care why!

I wasnt trying to be glib, I'm saying it doesn't necessarily matter. If I notice the Dow rips 50 points higher every Friday afternoon I buy it at lunchtime. It could be because they have naked dancing ladies on the exchange floor, I dont care.

 

[klw]

I sometimes trade daily FTSE options, and I've noticed that quite often, FTSE will make sharp 10-15 point movements, in the last few minutes of trading -- sometimes in the period of time after the "official" close of 16:30 but before the closing price is officially settled.

Is there any reason or pattern for this? Does it happen based on particular events?

I'm just trying to understand it so that I can predict it better; at the moment I close all of my positions 5 minutes before market close and often end up paying a spread that I might be able to avoid if I knew whether or not to expect a price jump.

Years ago when I traded the FTSE large size volumes were held back from being published on the tape for up to an hour after the actual transactions took place ( a lovely sneaky edge for the m/m's ) , also the largest volumes take place just prior to and just after market open and close, so it could be a combination of the former and latter or just the latter, as has been said already, large closing volume auction. I don't trade the ftse any more and I don't use volume either so maybe someone who does may see something different these days.

As regards how you can take advantage of it and knowing the reasons why this happens, I can't see how without knowing the make up of this volume,all that information will soon be displayed on the chart anyway and that's all I need to trade.

 

[marcusant]

Good observation - Its basically market on close orders (MOC's) that have to be filled before the daily settlement price at 4:30pm. Often these are orders from funds and institutions.

If you are trading the FTSE futures then you will often see large orders being put through the market. Sometimes large bids and offers appear and the market drives away from them ( everybody front runs the orders) until the orders go to market. Determining direction ahead of time is hard, its easier to go with the flow.


You might find something interesting if you look at the closes on the last day in a quarter.

 

[MrBrilliant]

I wasnt trying to be glib, I'm saying it doesn't necessarily matter. If I notice the Dow rips 50 points higher every Friday afternoon I buy it at lunchtime. It could be because they have naked dancing ladies on the exchange floor, I dont care.

Yes that's true and fair enough, but I thought maybe if there is a reason that indicates it happens more frequently on Fridays or not at all on Thursdays, or that it moves more when there is a GDP announcement the same day, or some correlation with something else, etc. then that might be helpful.

(In general I agree with you.. I've made money from the markets and I don't really understand anything about the economy or markets; I don't even understand what they're saying on CNBC. But I think I should start learning something..)

 

[MrBrilliant]

Thanks for the info guys, I really appreciate it.