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It is important to note that just because people can trade after hours, doesn't mean after-hours trading takes place in all stocks. If there is little interest in a stock, it may have no after-hours trades remember, for a trade to occur there must be a buyer and seller who are willing to transact at the same price. While earnings in large companies often produce a lot of after-hours activity, earnings in a small relatively unknown company may not attract any after-hours trades at all.
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For traders interested in jumping into trades after earnings, or day traders who are interested in trading the earning volatility , there are a couple of places to look. Companies publish, in advance, when they will be releasing earnings and whether it will be after hours.
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All earnings are listed on Yahoo! Most trading and charting platforms also provide some form of the pre-market and after-hours active list.
As mentioned above, earnings in well-known companies typically offer the best trading opportunities. Price movement and volume are required, so if no one cares about the stock then the volume isn't going to be there even though a few traders may cause the price to move.
Ask Matt: Trading stock options in after hours
There is one major advantage to trading after hours, and that is:. With fewer active traders, an individual can nab favorable prices that may not be available once more liquidity enters the market again. Unfortunately, this advantage also has a downside. Less competition means:.
While it is possible to get some favorable prices and trades after hours, you could also be on the losing end of that deal you might be the one giving a good price to someone else. With wild price swings and sporadic volume, if you end up on the wrong side of a move it can be devastating. There may be lots of volume in the stock overall, but not necessarily at the price you want to get in or out at.
Another con is that what looks like an easy trade on a chart may actually not be. The attached chart shows an earnings release right after the bell.
Extended Hours Trading
That means very few people were able to buy this stock or cover short positions. As the stock price begins to settle down around PM on the chart , more traders are able or willing to participate and volume increases. Even though a lot of the movement had already happened by PM, there was still ample movement for trades.
The con here is that the big moves are tough to get in on. The pro is that there is usually an opportunity to get some trades in once the initial pandemonium has subsided and there is still volume or increasing volume. Some traders opt to develop specific strategies for trading after hours or for news events, but typically the after-hours strategies employed will be quite similar to those used during regular trading hours.
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Traders may opt to use a news-related strategy or a trend following strategy. Both online and at these events, stock options are consistently a topic of interest.
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The two most consistently discussed strategies are: 1 Selling covered calls for extra income, and 2 Selling puts for extra income. The Stock Options Channel website, and our proprietary YieldBoost formula, was designed with these two strategies in mind. Each week we put out a free newsletter sharing the results of our YieldBoost rankings, and throughout each day we share even more detailed reports to subscribers to our premium service.
Stocks Options With Highest Daily Volume -
On the CALLS side of the options chain, the YieldBoost formula looks for the highest premiums a call seller can receive expressed in terms of the extra yield against the current share price — the boost — delivered by the option premium , with strikes that are out-of-the-money with low odds of the stock being called away. On the PUTS side of the options chain, the YieldBoost formula considers that the option seller makes a commitment to put up a certain amount of cash to buy the stock at a given strike, and looks for the highest premiums a put seller can receive expressed in terms of the extra yield against the cash commitment — the boost — delivered by the option premium , with strikes that are out-of-the-money with low odds of the stock being put to the option seller.
The results of these rankings are meant to express the top most ''interesting'' options identified by the formula, which are meant as a research tool for users to generate ideas that merit further research. This Slide: 1 of 15 Continue to slide 2 » It's puzzling for some investors that there's no similar premarket and after-hours trading available for many stock options. The reason is simple: Stock options don't trade in extended hours because there's not enough interest, says Jim Bittman of the CBOE Options Institute, the educational arm of the large options exchange.
Options exchanges have looked into extending trading hours, but found there's not enough trading volume to justify the cost, he says. There are some exceptions.