Definition
The term closing price refers to the last price of a contract or security at the end of a trading session. The closing price is available shortly after 4:00 p.m. Eastern Time.
Explanation
The closing price is the last trading price of a security or contract on a given day. The value is important because it becomes the benchmark for a price increase or decrease on the following trading day. Since trading can occur after-hours, those price quotes are accompanied by the letter T, which tells traders this was not a regular session trading price and will not affect a quoted high or low on the proceeding day.
Even though after-hours prices are ignored from a benchmarking standpoint, they do reflect the market's sentiment towards a security, such as common stock, and options or futures contracts. For this reason, investors should consider all price information prior to trading a security.
Adjusted Closing Price
One variation on a closing price is the adjusted closing price. These adjustments help traders to understand the effect of a corporate action on the price of an equity. For example, if a company announces a 2 for 1 stock split and the closing price of their common stock was $100.00 per share, the adjusted closing price would be $100 / 2, or $50.00 per share. The same holds true for the less common reverse stock split.
Related Terms
The term closing bell refers to the ringing of a bell that signals the end of securities trading for the day. The most notable of the closing bells is that of the New York Stock Exchange.
Moneyzine EditorJanuary 11th, 2024
The term close refers to the end of a trading session as determined by the financial market or exchange. Traders may have the option of placing orders after the close, which is known as after-hours trading or extended hours.Moneyzine EditorJanuary 11th, 2024
The term class B shares refers to common and preferred stock that may offer their holders fewer benefits, or charge higher fees in the case of mutual funds. Class B shares are normally subordinate to class A shares in terms of liquidation preference.Moneyzine EditorJanuary 11th, 2024
The term class A shares refers to common and preferred stock that offer their holders additional benefits, or different fees in the case of mutual funds. Class A shares normally have liquidation preference over all other shareholder classes.Moneyzine EditorJanuary 11th, 2024
