How does "after hours" stock trading work?

January 13, 2005 8:35 PM

How does "after hours" stock trading work? Is it something a small time stockholder can take advantage of, or only for the big wheels?

The recent rise of Apple (after the Macworld address and earnings report), for example, happened almost entirely after hours. How can someone who owns a few shares take advantage of this?

posted by aladfar to Work & Money (8 answers total)

You can't. You can only sell them at market open the next day. Unless you, say, run a mutual fund with billions of assets. Then you can probably do it, but you wouldn't need AskMeFi to tell you how.
posted by kindall at 9:17 PM on January 13, 2005

Generally, late trading, as it's known, is illegal. (Don't fuck with Spitzer while he's running for governor.) There are certain exemptions, of which I don't know enough about to give you a good explanation. Also, some types of futures trading occurs after hours. Generally, the proletariat is not invited to these parties.
posted by Saucy Intruder at 9:23 PM on January 13, 2005

There's really 2 ways that stocks can be traded after hours: finding people who want to buy or sell a stock after a market closes (this was traditionally large block trades for institutions, but with the rise of the Information Superhighway, it is more open to individual investors) or just trading on global exchanges (London, Tokyo, etc).

And yes, you can trade stocks after hours - depending on whether your broker offers it. It comes with a number of unattractive problems, though.
posted by milkrate at 9:28 PM on January 13, 2005

(The mutual fund late trading scandal is completely different than after hours trading. MF late trading has to do with mutual funds only being priced once per day, at 4pm. If you place an order post-4pm, you are supposed to get the day's ending price. The late trading scandal was giving hedge funds and other high net worth investors today's starting price [the price posted yesterday at 4pm] after today's 4pm deadline. [The other part of it was "market timing", but that's a little different])
posted by milkrate at 9:39 PM on January 13, 2005

Response by poster: Thanks for the link milkrate, it was helpful.

But I still don't understand what's happening in these after hours trades. If the stock exchange itself is closed, how are the trades set up and executed? Why do some tickers track after hours prices while others don't?
posted by aladfar at 10:53 PM on January 13, 2005

i know etrade lets you do it
posted by reverendX at 10:55 PM on January 13, 2005

You're right, thanks for the clarification. I was thinking in terms of trading after hours to take advantage of news released after the floor is closed. Generally, in that case the trade shouldn't execute until the next morning (by which time the news will already have affected the price).
posted by Saucy Intruder at 10:57 PM on January 13, 2005

The after hours market is just basically a set of private markets. You don't need to trade stock on an open exchange, though it does provide you with some nice services - you could sell your shares by putting an ad in the newspaper, use one of these private markets, etc.

There's a few of these places, but the largest is INET (owned by Reuters). Here's a list.

Orders are matched by the individual operation - i.e. you place an order on INET that gets matched up with an offsetting order on INET.

In contrast, if you placed an order while the exchange was open, you would benefit from having an entire world of buyers and sellers to get the best possible price.

Here's an FAQ that may help you.
posted by milkrate at 1:26 AM on January 14, 2005