Closing Price

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

closing bellcloseclass B sharesclass A shares