How is the opening price determined?

How is the opening price determined?

• A. The last traded price
• B. Maximum executable trading volume
• C. The average of the last two trades
• D. The opening price is fixed by exchange rule

Answer: (B)

The opening price is set by the opening auction, where orders on both sides are collected and matched. The price chosen is the one that would allow the greatest number of shares to be traded at market open—the level that maximizes executable volume. This reflects how supply and demand coincide at the moment the market opens, giving traders the price where the most activity can happen right away. Other options don’t fit because the opening price isn’t simply the last traded price from before the open, nor is it the average of recent trades, and it isn’t fixed by a rule. It emerges from the auction process and its volume-maximizing outcome.

The opening price is set by the opening auction, where orders on both sides are collected and matched. The price chosen is the one that would allow the greatest number of shares to be traded at market open—the level that maximizes executable volume. This reflects how supply and demand coincide at the moment the market opens, giving traders the price where the most activity can happen right away.

Other options don’t fit because the opening price isn’t simply the last traded price from before the open, nor is it the average of recent trades, and it isn’t fixed by a rule. It emerges from the auction process and its volume-maximizing outcome.