What Is Overnight Market Trading: An Overview

The common knowledge is that the stock market closes at 4 p.m., or 8 p.m. at the latest in the after-hours session. However, qualifying account owners have access to almost 24-hour markets dealing in currency, futures, and other derivatives through a reputable prop firm.

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Trading on Overnight Markets

One of the products with the most after-hours activity is the E-mini S&P 500 futures, which trades on Globex, the all-electronic trading platform operated by CME Group. It is traded under the symbol /ES on the thinkorswim® trading platform.

E-mini S&P 500 futures trade on a schedule listed in U.S. Central time (CT) due to CME Group’s Chicago-based headquarters. The week for /ES starts on Sunday at 5 p.m. CT and finishes on Monday at 4 p.m. CT. For the remainder of the week, the same routine is followed until Friday at 4 p.m. CT, when trading is suspended until Sunday.

The trading hours for other goods could differ. These futures products include a broad range of industries, such as currency futures, commodities futures, metals (gold, silver, and platinum), energy (oil, gasoline, and natural gas), and agricultural (corn, soybeans, and wheat).

Possibilities for Trading Overnight

One disadvantage of trading stocks and equity options is that you can only trade for around one-third of the day; in the other two-thirds of the day, you are powerless to respond to events or breaking news. That inconvenience disappears when you switch to trading futures.

Despite providing more profit opportunities than US equity markets, trading futures overnight poses the risk of lesser liquidity due to reduced trading activity and higher bid-ask spreads.

Futures are frequently impacted by potentially market-moving news that emerges outside of regular trading hours; for some traders, this serves as an “early warning signal.” For instance, if a trader owns a basket of stocks that tracks the S&P 500® index (SPX) and news breaks throughout the course of the night, they may choose to trade/ES in order to protect their portfolio from a possible down open.

Comparably, a trader who owns energy businesses may trade futures contracts related to their assets, such as Crude Oil futures (/CL). This kind of nighttime trading is viewed by some as a strategy for managing “overnight risk.”

While keeping an eye out for possible chances for overnight trading, pay attention to the announcements and news from the Bank of Japan (BoJ) and the European Central Bank (ECB), as well as China’s economic reports, the majority of which are pre-scheduled, much like those in the US.

When the London Stock Exchange opens at 2 a.m. CT, and the Tokyo Stock Exchange opens at 7 p.m. CT, some traders also search Asia for news that might move the market. For further details concerning market hours check out our blog.