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StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
The risk that a stock jumps from one price to a very different one without trading in between.
Why It Matters
Prices don't always move smoothly. After earnings, news, or an overnight halt, a stock can 'gap' - the next trade prints far from the last one, with nothing in between. Gap risk is why stop orders can disappoint: a $45 stop-loss becomes a market order, but if the stock opens at $40, it fills near $40, not $45. A stop-limit avoids the bad fill but may not execute at all. Gaps are most common overnight, around earnings, and in thinly-traded names.
Key Points
- A jump in price with no trades in between
- Common overnight and around news or earnings
- Can fill a stop-loss well past its stop price
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Related Terms
Common Questions
The risk that a stock jumps from one price to a very different one without trading in between. Prices don't always move smoothly. After earnings, news, or an overnight halt, a stock can 'gap' - the next trade prints far from the last one, with nothing in between.
Prices don't always move smoothly. After earnings, news, or an overnight halt, a stock can 'gap' - the next trade prints far from the last one, with nothing in between. Gap risk is why stop orders can disappoint: a $45 stop-loss becomes a market order, but if the stock opens at $40, it fills near $40, not $45. A stop-limit avoids the bad fill but may not execute at all. Gaps are most common overnight, around earnings, and in thinly-traded names.
A jump in price with no trades in between
Common overnight and around news or earnings
Can fill a stop-loss well past its stop price