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After-hours trading usually starts as soon as the market closes and lasts until 8 pm. It is made possible through Electronic Communication Networks (ECNs). You can trade many securities during this time, including stocks and futures, but what about options?
You can’t buy or sell normal call/put options after hours. You can only do so during regular trading hours, from 9:30 am to 4 pm EST.
The only thing you can do after hours with options is place limit orders. This protects traders from substantial losses and allows them to better control their cash balance.
In this article, I will go into detail how and when you can trade options, along with which options trade after hours and which don’t. I will also cover if and how the price of options changes after hours.
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When Do Call/Put Options Trade on the Markets?
Call and put options trade on the markets during regular market hours, starting from 9:30 am until 4 pm EST. Outside of this time, you can’t immediately open or close positions in call/put options.
However, there are a few exceptions to that, and they come in the form of Exchange traded fund options (ETFs). Not all, but a few ETF options trade 15 minutes after the market closes (until 4:15 pm).
Additionally, some options trading on Nasdaq and the NYSE trade between 4 pm and 6 pm EST. ECNs fuel these transactions.
Why Can’t You Trade Call/Put Options After Hours?
The after-hours market for stocks lasts from 4 pm until 8 pm. If you can, you should avoid trading during this period because of the lower trading volume resulting in wide bid-ask spreads, order restrictions, and professional traders that dominate the after-hours market.
Some investors may be puzzled by the fact that they aren’t able to trade options before or after regular market hours despite that being possible for most stocks.
However, there is a good reason for that.
Call/put options can’t be traded after hours because there isn’t enough interest, resulting in a low trading volume that doesn’t justify the costs. Though some exchanges have talked about extending the hours, they found that the trading volume isn’t high enough for it to be financially justifiable.
Placing Limit Orders
While you can’t buy call and put options after hours, you can place limit orders for the options you want to buy. A limit order lets you specify the price that you want to buy or sell the option for.
Your broker won’t execute the order unless the option is trading for the limit price or better and it won’t be filled until the following day.
A limit order is the second most popular way of filling option orders after a market order – which buys or sells the option immediately. While market orders aren’t available after hours for call and put options, limit orders are.
You can also place limit orders for options anytime before or after the market is opened/closed however they won’t be triggered until the trading day opens. So if you place a limit order to sell or buy an option it won’t go into effect until the option market opens as well.
Limit orders will either end up being filled or expire.
Day limit orders will expire as soon as the current trading session ends. At the same time, Good-till canceled limit orders carry over from session to session and will either expire, will execute, or the trader will have to manually cancel them.
When you place a limit order for options after hours, it won’t execute until the market opens. Keep in mind that there is no guarantee that the limit order will execute at all since there has to be a buyer/seller willing to accept your price even during market hours.
Do Option Prices Change After Hours or During the Weekend?
Option prices do not change after hours or during the weekend. As soon as options stop trading (4 pm for most), their cost remains based on the last stock price at the time of the market closing.
However, since the stock price will change after hours and during premarket then option prices will rarely stay the same from the close. The price will change as soon as the market opens up again.
This information is beneficial to know around earnings season. Most companies will release their reports after hours or when some news or developments are made public, which can significantly impact a particular stock’s value.
It would be best if you didn’t consider the price of an option after hours or during the weekend since the price will change, sometimes drastically, once the market opens. Any orders that you place based on the last trading price of the option will remain unfilled unless the price somehow falls below your bid.
Options That Trade After Hours
Regular call and put options can’t be traded after hours, but other types of options can. Here are some of them:
- SPX and VIX options. SPX options are based on the S&P 500 index, while VIX options use the CBOE volatility index as their underlying asset. These options start trading premarket (at 3 am) and continue trading through when the market opens. There have also been talks about extending the trading times to until 8pm.
- Futures options are the most popular type of options that trade after hours. These options allow the holder to buy or sell a future at a specific price and date. Since futures trade 23 hours per day, five days per week, you can also trade futures options during these times.
- Some ETF options continue trading 15 minutes after the market closes. These are securities that represent ownership of assets in portfolios, like a mutual fund.
Regular call and put options can’t be traded after hours. They only trade during regular market hours between 9:30 am and 4 pm EST. This is the case because there isn’t enough interest to justify the costs of making that happen.
During after hours and over the weekend, options will keep the price they were last trading for when the market was open.
With that said, you can still place limit orders for call/put options after hours. Also, some options trade after the market closes, including futures options, ETF options, index options, and others.