Showing posts with label After hours trading. Show all posts
Showing posts with label After hours trading. Show all posts

Tuesday, 1 July 2014

NYSE&NASDAQ: What is after hours trading?

When you browse for quotes for stocks in US markets, you will see something like this:

after hours trading
(Picture print-screened from the The Wall Street Journal)

The price above is the usual closed price. The price below is the so-called after hours trading price. So what is after hours trading? While this may seems common in US, it is not the case, at least in KLSE.

US market trading hours are below:
(All times are in Eastern Time (ET). Eastern time refers to the time zone in the eastern part of US, not the time zone for eastern countries in the globe, e.g. Japan.)

1. Pre-Market Trading Hours: 4:00 a.m. to 9:30 a.m.

2. Trading time: 9:30 - 4:00 p.m. (Unlike KLSE which has a break time of 2 hours in the afternoon, no break in US markets. Break time even in market trading, what a Malaysian pattern? )

3. After hours trading: 4:00 - 8:00 p.m.

We see that apart from the normal trading hours, there is also a pre-market and after hours tradings, which are also known as extended hours trading.

The reason for this is for investors to trade outside normal trading hours (nonsense?).  This is because a lot of companies make announcement, e.g. quarterly report, corporate news before market open or after market closed.

For example, Chicago Board Options Exchange ( CBOE ) plans to  list options for  GoPro, Inc. (GPRO). (NB: This GPRO has nothing to do with the GPRO in KLSE, although they have exactly the same listing name.) This was announced at 17:05, 30 June 2014 (i.e. after market closed). Seeing this as a positive sentiment for the share, the share of GPRO rose during after hours trading:

(Picture taken from Nasdaq.com)


30 June 2014, 4:00 p.m. price: 40.55 (normal trading hours)
30 June 2014, 8:00 p.m. price: 42.15 (after hours trading)
Change: 3.95%


30 June 2014, 4:00 p.m. price: 40.55 (normal trading hours)
1 Junly 2014, 7:30 a.m. price: 43.37 (pre-market trading)
Change: 6.95%


The price movement will continue until the market opens. Therefore, after hours trading and pre-market trading provides a very good indicator on how the market reacts to the news, and a good insight of the price once the market opens as normal. 

Extended hours tradings give investors to trade at a flexible time. It can also serve as the time to "digest" the news just announced by companies. In addition, for pre-market trading, it can reflect the conditions in other markets, especially EU markets since EU markets start earlier than US markets.


Last but not least, some facts about extended hours trading:
  • they are REAL trading, requires both buyer and seller for a transaction to match (in US, filled is used instead of matched).
  • All stocks listed in NYSE, NASDAQ and AMEX companies can be traded in extended hours trading. 
  • Only for stock trading, does not include options.
  • A lower extended hours trading activity (lower volume) will result in a wider spread (i.e. a larger difference between bid and ask price. Again, in US they use bid and ask instead of buy and sell.) 
  • Share price change, i.e. % change is still calculated based on closed price during normal trading hours. Chart only shows the price movement during normal trading hours.
  • You can view the most active, most advanced and most decline for after hours trading on Nasdaq.com
I hope you have an idea what is extended hours trading now after reading this.