Should you consider trading in extended hours?

Some stock traders and investors want to be able to trade before the stock exchanges officially open or after the official close of markets. Investor’s Edge offers that ability for U.S. stocks traded on the NYSE and NASDAQ. Let’s look at the mechanics and some of the benefits and risks of trading in extended hours.

The NYSE and NASDAQ are open for regular trading from 9:30 am to 4:00 pm, Monday to Friday, excluding market holidays.

Trading on eligible U.S. exchanges is available at Investor’s Edge from 8:05 am to 9:29 am and 4:00 pm to 6:00 pm on any day that the U.S. markets are open regular hours. When these exchanges close early — typically at 1:00 pm the day before a holiday or long weekend — the morning extended market session is unaffected while the afternoon extended session takes place between 1:00 pm and 5:00 pm. 

The TSX has an after-hours session from 4:15 pm to 5:00 pm, but during this time it’s only possible to buy or sell a stock at that day’s closing price. You’ll need to call the Investor’s Edge contact centre to place this kind of trade.

With Investor’s Edge, only stocks that trade on the NYSE or NASDAQ are eligible. OTC (over-the-counter) stocks don’t qualify.

You can place buy or sell orders for eligible U.S. equities in a registered account, such as an RRSP, TFSA, RESP, RRIF, or a cash account. In margin accounts, you can place sell orders on stocks you already hold.

You’ll need to place a limit order, which means you’ll need to specify the highest price you’re willing to buy the stock or the lowest price you’re willing to accept for a stock sale.

Keep in mind that foreign currency conversion is not available in extended hours. This means you’ll need to already have sufficient U.S. cash to cover the cost of any trade placed in the extended hours.

Take a look at the current bid and ask prices for an indication of the stock’s current price level. A stock’s last price may not represent a recent transaction because trading volume is typically much lower in the extended hours. However, the stock’s last transacted price will be visible when you enter an order.

No, the commissions are the same as regular hours trading. Online trades are charged the online commission, while trades placed by phone are charged the agent-placed call rate. Learn about CIBC Investor’s Edge commissions.

Unfortunately, no. Although the underlying stocks trade on the NYSE or NASDAQ, the CDRs themselves trade on the NEO Exchange and aren’t currently eligible for extended hours trading.

Only U.S. listed stocks that trade on NASDAQ or NYSE are currently eligible for extended hours online trading with Investor’s Edge. Options, CDRs, structured notes, fixed income and mutual funds can’t be traded outside of regular market hours. You’re of course free to enter orders for those products at any time — the orders become active during regular market hours.

The main risk in extended hours trading is low liquidity. This occurs because there are many fewer participants as compared to regular market hours trading — as a result, trading can be more volatile and bid-ask spreads can be wider. This can make it difficult or at times impossible to have your order filled at a specified price. 

The increased volatility in the extended hours can also make it difficult to read some technical market signals or understand investor sentiment around a particular development.

You can choose to take action when news breaks outside of regular trading hours. This could be stock-specific news, such as earnings release, merger announcements; or a general news item that affects the whole market or economy.

You can choose to take action when volatility occurs in foreign stocks or foreign markets. In a 24-hour period, some foreign markets are open at times when U.S. markets are closed. Foreign-listed companies can react to stock-specific or economic or political developments in that time. Investors may extrapolate that news to U.S. stocks in the same sector, or draw implications from companies that have a business association with a U.S. company or share some other connection. Some U.S. companies are dual listed on foreign exchanges and will trade on those exchanges outside of regular U.S. exchange hours.