Most beginner traders know that the stock market is open during the normal hours of 9:30am-4:00pm EST. However, there are some ways that you can trade stocks during the pre market or post market. But can you trade options after hours? Unfortunately, in most cases, the answer is no; You cannot trade options after hours. However, there are a couple tricks you can use to hedge your options positions during after hours using equities. More on that later.
Why would you want to trade options after hours?
There’s a 24 hour news cycle
You might wonder if you can trade options after hours if you ever heard some impactful news about the underlying stock that might have a large effect on the stock price. For example, a company might have an earnings call scheduled after hours. Or there could be some new foreign events or regulations over the weekend that you believe will have an effect on the stock. When something like this happens, you may notice that there can be drastic moves in options prices when the market opens up again the following morning.
Another reason that you might want to trade options after hours is that you simply aren’t available to trade during normal market hours. These days, new people are entering into the options market in droves. While some of them are retired and have plenty of time available to trade during the day, many new traders have to manage their portfolios around their work schedule.
You might also live on the West coast, where the time difference results in the market opening as early as 6am where you live. If you’re an early bird, this won’t pose much of an issue for you. However, not everyone gets up at the crack of dawn.
What should you do if you want to trade after hours?
If you want to trade after hours, you’ll need to trade stocks instead of options. Not every brokerage will let you trade during the pre and post market, but here are a few that will allow you to do so.
- TD Ameritrade
Tip: You can hedge your options trades during after hours by buying or selling the underlying asset.
Imagine you’ve entered into an option position by purchasing an ATM call on some company. After the market closes, some big news comes out that sends the stock price soaring up in the post market. Unfortunately, you can’t sell your call contract to lock in your gains because options trading is closed for the day.
What you could do in this situation to secure your profits before the options market opens back up is to sell short the company while the price is high. With this method, you’ll get cash in your account right away – and, your short position is covered by your long call option. This is sometimes referred to as a ‘synthetic long put’ or a ‘married call’.
So, while you can’t trade options after hours, there are some strategies that can allow you to hedge or modify your options positions during after hours.
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