Pre-Markets – How They May Benefit Your Trading Portfolio
In some circles the term “Pre-marks” is used to define the practice of businesses marking their stock as an offer to sell at a later date, and having their stock price marked up higher than the fair market price. The practice has been around for a long time, but until recently most observers assumed that the mark-up was being done by a third party. Recently however, more businesses are choosing to mark their stocks with pre-marks themselves. This allows them to lock in at a certain price before the actual offer to sell date.
Many brokers will offer their clients a list of stocks to choose from that have already been traded on their platform. If you go this route, you need to be careful that the pre-marks are only available for a short period of time. If they disappear too quickly your offer to trade will not be as valuable to other buyers, and you could lose out on all the profit you have made.
Another way to circumvent the use of pre-marks is to place your order to buy on the same day you put the order to buy. You could then wait until the closing prices are above the pre-marks and then buy the stock. While this will get you immediate credit for the difference between the closing price and the pre-marks, it could also hurt you should the price drop immediately after you purchase the stock. This is because your quote to trade may have already been influenced by the market going up and then falling back down. If you purchase the stock at the pre-marks and then trade it later on to cover the mark-up price, you may not be able to recoup much of your investment. To avoid this problem, place your orders to buy and sell at different times.