Amateur Hour is a common term used in the Stock and Options markets referring to the time when the market just opens up after the pre-market session. During this time volatility typically spikes.

There are many reasons for this volatility spike and they are key to understanding the “why” in this market equation.

Come that time (around 9:30 a.m. ET to 10:30 a.m. ET) eager — amateur traders rush into the market, ready to kick off the new trading day. But, these amateur traders are unaware of the well known phenomenon that takes place during these opening minutes.

During these opening minutes, many traders are also seeing their put-in-the-night-before orders, to be executed at the open of the market hit. So, those trades are just now becoming a part of the equation after an entire night of waiting. These market orders typically say, “get me in at whatever price; just get me in ASAP.” With this type of order, and the increased demand in the market, the Market Makers start to set their prices and they can essentially increase the prices to match demand.

Based upon this trading practice, the market has a tendency to whiplash and change direction as the movements are not indicative of the actual market trend, but rather the culmination of a bunch of orders hitting the market all at once. That is amateur hour.

There is a greater reaction on Mondays because our imaginations run wild over the weekend about missing "it", and it usually is worse after a three day weekend. Did anybody here see that 50k order hit right at the open today? The offer was .80 (U.S.), but this order was executed for .82. The amateur wiped his brow, and said "Whew, I got in!" The trader chuckled to himself because of the easy $1000 just handed to him in such a predictable fashion. Would anyone here pay $1000 more for their cart of groceries than they needed to? Besides being patient in waiting for Poet to deliver to the shareholders, we need to be patient in placing our orders. Let the market come to you.