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After-Hours Trading (or After-Hours Thinking About Trading): Managing the Overnight

Do you ever find yourself lying in the dark, thinking about trading? It might be those open positions in your account getting the better of you. Or you might just need to pop in and do some after-hours trading. Here are some things that keep traders up at night.

https://tickertapecdn.tdameritrade.com/assets/images/pages/md/After hours: trading ideas for overnight
5 min read
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Key Takeaways

  • Many markets are open for trading between the close and the next day’s opening bell

  • At-the-money options reach their height of uncertainty just before expiration

  • Stubbornness and other mental mistakes can sometimes lead to stress

If you’re like most people, you have a bedtime routine—lock the doors, brush your teeth, find your spiritual center. If you carry outstanding positions, do you tuck them in at night? 

Even though you may be sleeping, the market isn’t. Somewhere in the world, data is being released, news is being made, markets are responding. And if you have positions on—especially those that may have weighed on your mind during the trading day—it’s often during the overnight hours when those thoughts and feelings might be most acutely felt.

So grab that plate of milk and cookies, and let’s look at some things that keep traders up at night—and what you can do about them.

Log In, Monitor, Tap, or Click

First things first. If you find yourself thinking about trading at night, think about trading at night. Many of your favorite markets are open and available in the overnight hours—and virtually around the clock. 

Premarket and after-hours trading. Many listed stocks are available to trade in the premarket (from 4:00 a.m. to 9:30 a.m. ET, when the market opens) and again in so-called after-hours trading from the time the market closes at 4:00 p.m. until 8:00 p.m. ET. Companies typically report earnings either before the opening bell or right after the close, so these periods can help you navigate positions outside of normal hours. But be careful: stocks are typically less liquid in the premarket and after hours, especially right before or after a news release.  

24/5 trading. TD Ameritrade was the first U.S. retail broker to offer overnight trading in select securities, available 24/5 via the thinkorswim® trading platform by TD Ameritrade and the thinkorswim Mobile app. As of July 2020, the list of available securities included a broad selection of exchange-traded funds (ETFs) covering a wide range of sectors. Check the complete list of 24/5 securities, or go to the Trade tab on thinkorswim and look for the purple EXTO Eligible sign, which stands for extended hours overnight (see figure 1).

Overnight trading on thinkorswim
FIGURE 1: COME IN; WE’RE OPEN. Trade certain securities 24/5 on the thinkorswim platform or thinkorswim Mobile App. For illustrative purposes only. 

Futures. Approved accounts can access the futures market 23.5 hours a day, six days a week. (Futures open at 5 p.m. CT on Sunday and close for the week on Friday at 4:00 p.m CT.) These derivatives contracts allow you to hedge or speculate on stock indices such as the S&P 500 (/ES) and Nasdaq-100 (/NQ); commodities like crude oil, gold, and agricultural products; interest rates, foreign currencies, and more. Note that futures involve margin, which can magnify losses as well as gains. Learn more about futures to see if they’re in your future.    

Research. Even if you’re not interested in trading outside normal hours, after hours can still be the best time to prepare trading strategies. Many traders use this time to evaluate previous trades—the losers as well as the winners—check the charts, research the fundamentals, and develop their game plan. Want to experiment with something new? The off hours might be the time to log in to your paperMoney® account and place simulated trades.

Remember, if you do end up spending time on the trading platform at night, you still need to get adequate rest. Burning the candle at both ends isn’t likely to be sustainable in the long term.

Options Expiration: When the Cradle Rocks

As option traders know, the closer you get to expiration, the more uncertain the outcome of your positions—particularly those that are at the money. At expiration, an options contract’s delta is either zero (out of the money and expires worthless) or 1.00 (in the money and exercised or assigned). That delta uncertainty—which intensifies the closer you get to expiration—is called gamma.

Furthermore, although each option decays throughout its life (that’s called theta), that decay becomes more pronounced the closer you get to expiration. If you’re long options, you want the market to move (and in the right direction). If you’re short, you’d like the market to stay still so you can get the most out of your theta.

The common thread here is uncertainty. Is all that uncertainty weighing on your mind at 3 a.m.? If so, it might be time to reassess your strategy. Perhaps your position sizes are too big. Or maybe carrying options positions into expiration isn’t your cup of tea. If so, consider closing out or rolling options positions before they start playing with your mind.

Let’s Not Quarrel

Ever heard the phrase “don’t go to bed angry,” popular in premarital counseling? That applies to your trading positions as well. If you find yourself doing battle with something in your account—maybe a position that you’re hanging onto out of stubbornness or spite—you either need to accept it for what it is or be prepared to part ways.     

There’s another phrase traders sometimes use: “Blowing through a mental stop order.” A mental stop is kind of like a regular stop order, but it’s not one you enter as a trade—it’s one that stays inside your head. And if you blew through it, that means you told yourself you’d close out a loser if it went against you by X amount. Then when it went against you by X amount, you hung on. Or worse, maybe you even doubled your position.

You know what they call traders who aren’t disciplined in their exit points? Ex-traders.

You don’t want to be an ex-trader. When a position is keeping you up at night, it could be a sign that you’re not being true to your trading strategy. It could be time to address a possible strategy change head-on.

No job should be an all-day/all-night gig, and that’s especially true with trading—whether you trade for a living or in your spare time. So make sure you’re giving your trader brain what it needs so you can get that shut-eye when you need it.

But if you get the urge to log in during the wee hours, the platforms (and many of the products you trade) are open for business. Pass the cookies, please.

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Key Takeaways

  • Many markets are open for trading between the close and the next day’s opening bell

  • At-the-money options reach their height of uncertainty just before expiration

  • Stubbornness and other mental mistakes can sometimes lead to stress

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