lystn

Hey everyone, Kirk here again and welcome back to the daily call. Today, we are going to be talking about afterhours markets trading and just going through an overview for traders and basically some concepts and things you need to know if this is your first time learning about afterhours trading. There’s a couple of key things that we’ll talk about and you might hear me clicking around because I want to make sure we get all these comments or these dates and things like that right. If you do hear me clicking around, it’s just because I want to give you guys the right info. There’s a couple of things you have to understand about afterhours trading. One, that there’s regular market trading or kind of like I guess general market trading that typically occurs between 9:30 AM ET and 4:00 PM ET. That’s when most all contracts are trading. In fact, that’s the wide majority of contracts, volume, liquidity. Everything is traded between these regular market hours or regular trading hours. Again, 9:30 AM Eastern to 4:00 PM Eastern, wherever you are, that's when most of the US equity markets are open and everything is being traded. Now, what they have as they refer to afterhours trading is trading around these hours. You have to check with your individual brokers, see if you’re eligible. Most people should be eligible, depending on your account or what trading level and approval that you have, but most people should be eligible for afterhours trading. What you can do is you can trade in the after or premarket hours. That might go in different exchanges from as early as 6:00 or 7:00 or 8:00 AM, all the way up to in some cases, very, very late in the day like 4:30 to like 8:00 PM in the night. There’s this wide range where you can actually trade not during normal market hours. Now, why would they have this? Why even have this to begin with? I think one of it is just for access and for the ability to actually get into or out of positions after normal hours. We all know that news doesn't necessarily break during regular business hours. Something could happen overnight. Brexit was a great example of this where the Brexit vote actually came for the US markets overnight after the markets were closed. And so, many people have the ability and want the ability to then make decisions about their portfolio and their positions in these afterhours trading times. Now, I think there's definitely some inherent risks and dangers to trading in afterhours. One is way less liquidity. In afterhours markets, you're not dealing with regular buyers and sellers, meaning that there’s far less trading volume in every particular stock and ETF. And so, what that creates with less liquidity is it creates wider spreads, so you’re going to lose a little bit more to spreads in afterhours trading, it creates really, really high volatility because if there's a lot of low liquidity, a lot of low float or thinly traded stock, then anybody coming in and selling or buying 100 or 1000 shares creates this huge seemingly priced spike before the market opens. And so, that can be really dangerous as well because it may look like the stock is crashing or rallying significantly higher when it's just a couple of people who have come in and purchased or sold shares and that low liquidity creates this huge price spike in either direction. The other thing is it’s really tough for competition because as individual investors, you’re trading in afterhours against in many times, institutional investors that are really watching the news and this particularly happens around earnings announcements either before or afterhours trading on earnings where the stock has huge moves because of not inside Information because it’s not, but just more accessed information by institutional investors. That I think becomes a real negative downside to extended or afterhours trading too. I don’t do any afterhours trading, so I think the one caveat to all of this right now… This will actually be interesting to see how this moves in the future. But all options contracts don't have afterhours trading. Options contracts are based on the underlying during regular market hours. There’s no market to trade options afterhours, so therefore, I don't do any afterhours trading. I do watch what the markets do if I’m interested in a particular security or if we have an earnings trade on. We can definitely see where the stock is trading premarket or post-market in the day. But as far as options trades or trades that I do, I really don't do anything. I mean, zero afterhours, non market hours trading. I just stick to the regular market hours because it’s more liquidity the options are traded and much tighter spreads. It is interesting to note though that actually, earlier this year, TD Ameritrade which is the parent company of Thinkorswim actually introduced 24-hour ETF trading across the board and this was back I think in January of this year till 2018. But they announced what are called extended hours or EXTO hours for a lot of different ETFs. Some of the ETFs that they had I think were FXI, SPY, DIA, SLV, GLD, etcetera. This is really cool because what they have started to do is make the transition to an extended or 24-hour continuous cycle of trading a lot of these ETFs. I will go on the record of saying I think this is the first step and the first noticeable step by a big brokerage firm like this for the market to start transitioning to a 24-hour type trading cycle which I think can be scary for some people. I think it’s definitely scary for some people, is just knowing that the market’s trading always 24/7. But at the same time, I think it actually presents a unique opportunity for eventually options to be traded. Now, I don’t know if this will happen this year or next year, five years from now, but I think there will come a time where options are going to be able to be traded 24 hours a day just like Forex and things like that. And so, I think that it’s interesting because as traders, we have to then start thinking ahead in the future like what will this environment look like and how will this change. This is one of the main reasons why we started to heavily invest in and started to talk about our auto-trading software that gives you the ability to build these bots that are basically running in the background 24/7. And so, the reason that we did this is because I know that eventually in the future, we’re going to have continuous markets and frankly, we just can’t stay awake all the time to watch these. We are limited by our own human anatomy that we have to sleep at some point during the day which means that we can’t be there. Who’s there to watch our positions and make sure that if things go crazy in the middle of the night that a position gets taken off or orders get executed. That’s why we built this auto-trading technology, so that that’s in the background running for you and protects you along the way. It’s an interesting concept, like I said and I think TD is going to be the first one. I think other brokers just will soon follow this and give this extended or 24-hour access to a lot of these ETFs and then we’ll start to see this rollout to a lot more ETFs and eventually, some underlying equities like Apple and Google and Microsoft or some of these other ones which will be really, really interesting. As always, hopefully this helps out. Until next time, happy trading!