Trade Around the Clock: Capture Market Moves Beyond Regular Hours

This is where pre-market and post-market trading comes in, allowing traders to take advantage of trading opportunities and gain market exposure to potential volatility, without having to wait for cash trade to re-open, at which point price often gaps, and the opportunity that did once exist is now no longer present.

Here's a breakdown of the extended trading sessions:

• Pre-market: Occurs between 4am ET and 9:30am ET.
• Cash Market: The standard trading session, running from 9:30am ET to 4pm ET.
• Post-market (After-hours): Begins at the end of the cash session at 4pm ET, running until 8pm ET.
• Overnight: Offered by Pepperstone, this extends trading for select equities 24 hours a day, 5 days a week.

Pepperstone has now gone one step further than this, offering clients the ability to trade a select group of US equities 24 hours a day, 5 days a week, introducing an overnight trading session, in addition to the typical pre-, cash, and post-market trading hours, expanding the scope of after-hours and extended-hours trading.

Extended Hours Trading and Margin Requirements

It's important to consider margin requirements when trading with extended hours. Margin requirements for extended-hours trading on our platform remain the same as during regular trading hours. However, the increased volatility and lower liquidity during extended hours can magnify the potential risks associated with using margin.

Here's why:

• Margin amplifies gains and losses. If the market moves against your position, you could face a margin call requiring additional funds to maintain your position size. This risk is amplified by the potential for wider price swings during extended hours.
• Lower liquidity can make it harder to exit positions quickly. If there aren't enough buyers or sellers available at your desired price, it may be difficult to close your position and potentially limit losses.

Therefore, it's crucial to carefully manage your risk when using margin during extended-hours trading. Consider using a smaller position size or a lower leverage ratio compared to what you might use during regular trading hours.

Benefits of Extended-Hours Trading

Perhaps the most obvious advantage of extended hours equity trading is the ability to trade market moves that occur in the aftermath of corporate reports. It is incredibly rare for a publicly-listed US firm to report earnings during market hours, with research showing that around 95% of such firms choose to report either before the market opens or after it closes, according to the earnings calendar.

Naturally, as earnings drop, and fresh corporate guidance is released, market participants will move to rapidly discount this new information, often leading to significant price swings and impacting market sentiment in the minutes following news events.

Recent examples of such volatility include Nvidia (NVDA) rallying over 10% in post-market trade after Q4 23 figures were released, and Alphabet (GOOGL) falling as much as 8% after-hours, also after the release of Q4 23 earnings, as advertising revenue surprised sharply to the downside. These after-market close movements often result in large gaps at the cash open the following day.

Earnings are not the only benefit to extended hours trading, however. Other unexpected news events, such as M&A headlines, or geopolitical developments, can break at any time of day, with extended trading hours meaning that traders are more likely to be able to capture the opportunities that this news flow may present.

Extended hours trading also provides a feature from a convenience standpoint, particularly for market participants outside the US. The ability to trade pre- and post-market allows one to trade at a time of day more convenient to local time zones, rather than being constrained to trading only during the traditional cash session.

These advantages are amplified during the overnight trading session that Pepperstone now offers, which will likely prove particularly beneficial to those traders based in Asia, not only to take advantage of overnight breaking news, but also to mitigate risk were such headlines to drop. This is particularly beneficial as we move into presidential election season and the chance of a further deterioration in Sino-US relations escalates, while also being noteworthy as geopolitical tensions in the region continue to escalate.

Drawbacks of Extended-Hours Trading

This is not to say that extended hours trading does not come without risks, and potential drawbacks, the most notable of which are:

• Lower Liquidity: Price tends to be more stable during the cash session and, outside of earnings and other such events, volume is also concentrated during these hours, thus contributing to lower levels of liquidity and trading activity during the pre- and post-market session.

What this means for you: With lower liquidity, there might be a bigger difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask). This is called the bid-ask spread. A wider spread means you could pay more to buy a stock or receive less when you sell it compared to during regular trading hours. Additionally, it might be harder to enter or exit a trade quickly if there aren't enough buyers or sellers available at your preferred price.

• Higher Volatility: In turn, this lower liquidity can lead to more significant price movement during the extended session, though some may see this as a positive, depending on risk appetite and trading style.
• Wider Spreads: These two factors also typically result in the bid-ask spread being wider than during the cash session, particularly at the extreme ends of extended hours trade.

Available Stocks for Extended-Hours Trading

Initially, the following stocks will be available to trade as part of the new pre-, post-, and overnight market offering:

• AAPL: Apple
• AMD: Advanced Micro Devices
• AMZN: Amazon
• BA: Boeing
• BABA: Alibaba
• BAC: Bank of America
• CAT: Caterpillar
• DIS: Disney
• F: Ford
• GM: General Motors
• GOOG: Alphabet
• HPQ: HP Inc
• IBM: International Business Machines Corp
• INTC: Intel
• JNJ: Johnson & Johnson
• JPM: JPMorgan Chase
• META: Meta
• MSFT: Microsoft
• NFLX: Netflix
• NKE: Nike
• NVDA: Nvidia
• ORCL: Oracle
• PFE: Pfizer
• SNAP: Snap Inc
• TSLA: Tesla
• UNH: UnitedHealth
• V: Visa
• WMT: Walmart
• XOM: ExxonMobil

Clients can access extended hours trading by choosing symbols with the "-24" suffix. For example, AAPL.US will reference the Apple contract which trades only during the cash session, while AAPL.US-24 will reference the contract which trades 24/5.

Important: Day and after hours instruments, while having the same underlying asset, will have different margin requirements associated with each. Therefore, if you want to hedge one with the other, the full margin requirement for both instruments will apply.