Definition
A Zero Plus Tick (or Zero Uptick) refers to a security trade executed at the same price as the preceding trade, but at a higher price than the last trade executed at a different price. For instance, if consecutive trades occur at $10, then $10.01, and again at $10.01, the latter is noted as a zero plus tick.
Zero Plus Tick vs. Zero Minus Tick Comparison
| Feature | Zero Plus Tick | Zero Minus Tick |
|---|---|---|
| Price Movement | Same as previous, higher than the last different price | Same as previous, lower than the last different price |
| Direction | Indicates bullish sentiment | Indicates bearish sentiment |
| Regulatory Constraints | Governed by SEC rules on short selling | Also governed by SEC but indicates a different market action |
Example
Imagine you are trading a stock with the following transactions:
- Trade 1: $10
- Trade 2: $10.01
- Trade 3: $10.01
Trade 3 (at $10.01) would be classified as a Zero Plus Tick since it matches the same price of Trade 2, but is higher than Trade 1.
Related Terms
- Uptick: A trade executed at a price higher than the last traded price.
- Downtick: A sale at a price lower than the last traded price.
- Market Order: An order to buy or sell a security immediately at the best available current price.
Diagrams
graph LR
A[Last Trade Price $10] -->|Higher Price| B[Zero Plus Tick $10.01]
A -->|Lower Price| C[Zero Minus Tick $9.99]
B -->|Same Price| D[Another Transaction at $10.01]
C -->|Indicative of Bearish Sentiment| E[Market Movement]
Humorous Insights
- “Trading rules are like not stepping on a crack in the sidewalk—unless you’re doing a zero plus tick; then it’s all about stepping carefully!”
- Fun Fact: Before 2007, many traders were so tense about short selling that they wore ’tic’ tac toe patterns just to make themselves smile amid all the trading jargon!
Frequently Asked Questions
What is a zero plus tick?
A zero plus tick is a security trade executed at the same price as the previous trade while still being higher than the latest trade at a different price.
How are zero plus ticks useful for traders?
They provide insight into the market’s price trends and can indicate bullish sentiment.
What is the opposite of a zero plus tick?
The opposite is a zero minus tick, where the current trade price remains the same as the last but is lower than the last transaction priced differently.
Are zero plus ticks regulated?
Yes, until 2007 specific SEC rules controlled the circumstances under which you could short sell during zero plus ticks.
Suggested Readings and Resources
- Market Microstructure: Intermediaries and the Theory of Optimal Execution by Maureen O’Hara
- Flash Boys: A Wall Street Revolt by Michael Lewis
- Investopedia - Trading Terminology
Test Your Knowledge: Zero Plus Tick Quiz
## What constitutes a zero plus tick trade?
- [x] Executed at the same price as the last trade but higher than a previous different price
- [ ] Executed at a lower price than the previous trade
- [ ] It is the average price from the last three trades
- [ ] It is executed after hours at a higher price
> **Explanation:** A zero plus tick occurs when a trade matches the previous price but is above the last differing price.
## What is a zero minus tick?
- [x] A trade executed at the same price as the last trade but lower than a previous different price
- [ ] A trade executed at a higher price than previous trades
- [ ] A trade executed only during after-hours trading
- [ ] A trade that cannot be applied in stock transactions
> **Explanation:** A zero minus tick represents a trade at the same price but lower than the last differently priced trade.
## Can traders freely short sell on a zero plus tick?
- [ ] Yes, no restrictions apply
- [x] No, they might be bound by specific regulations
- [ ] Only if they flip a coin first
- [ ] Only in a bull market
> **Explanation:** Traders used to need to adhere to regulations against short selling on zero plus tick trades enforced by the SEC up until 2007.
## Does a zero plus tick imply bullish market sentiment?
- [x] Yes, it often indicates a bullish sentiment in trading
- [ ] No, it indicates bearish sentiments
- [ ] It means the market is unstable
- [ ] It has no relevance to market sentiment
> **Explanation:** A zero plus tick is often interpreted as a sign of increased buyer interest and bullish market sentiment.
## What rule did the SEC implement regarding short selling on zero ticks?
- [ ] Stocks may never be shorted
- [x] Stocks could only be shorted on an uptick or zero plus tick prior to 2007
- [ ] Traders can only short sell at midnight
- [ ] There are currently no rules for short-selling
> **Explanation:** The SEC had strict rules requiring stocks to be shorted only on upticks or zero plus ticks up until 2007 to prevent market destabilization.
## What would multiple zero plus ticks indicate?
- [x] An increase in buyer confidence or interest
- [ ] A drop in stock price
- [ ] That the market is totally unpredictable
- [ ] A new breakfast menu is being launched at your favorite café
> **Explanation:** Frequent zero plus ticks suggest sustained buyer confidence and increasing demand for the stock.
## What happens after a series of zero plus ticks?
- [x] Price may trend upward indicating bullish trends
- [ ] Price will immediately drop
- [ ] Nothing significant will happen
- [ ] It implies the market is closed for the day
> **Explanation:** A series of zero plus ticks can suggest continued price stability or upward price movements.
## Can securities have both zero plus and a zero minus ticks in one trading session?
- [x] Yes, trades can fluctuate between both types
- [ ] No, only one type can exist at any given time
- [ ] They must be separated by at least one hour
- [ ] Only if it’s a leap year
> **Explanation:** It is possible for both zero plus and zero minus ticks to occur at various points in one trading day depending on buyer and seller behavior.
## Would a zero plus tick be a good indicator to buy?
- [ ] Definitely not!
- [ ] It is irrelevant to the buying decision
- [x] It could indicate buyer interest, but one should also analyze market conditions
- [ ] Only if it’s lunchtime
> **Explanation:** While it indicates some level of buyer interest, further market analysis is vital for an informed decision.
## How did trading rules for zero plus ticks change over time?
- [x] Became less restrictive with current rules
- [ ] No changes were ever made
- [ ] Trading was completely banned on these
- [ ] The exchanges agreed to ignore all such trades
> **Explanation:** Historical rules have shifted, with fewer restrictions now governing short sales amid varying conditions in the market.
Remember, keep your trading as sharp as your pencils, and may the ticks always be positive! 🪙📈
