Can you trade ETFs when the market is closed?
Many security types are available, including stocks, options, bonds, mutual funds, etc. Most listed and Nasdaq stocks and ETFs are available in pre-market and after-hours sessions.
Trading for stocks and ETFs closes at 4 p.m. ET, but unlike with mutual funds, you can continue trading stocks and ETFs in the after-hours market.
Unlike mutual funds, ETF share prices are determined throughout the day. A mutual fund trades only once a day after market close. Volatile stock performance is curtailed in an ETF because they do not involve direct ownership of securities.
Just like stocks, you can trade ETFs on a stock exchange at any point during market hours. Whether you're an individual looking to invest, or a seasoned financial professional, ETFs are an easy and powerful investment option to help meet your goals.
It's worth remembering that some minor exchanges and select futures markets operate over the weekend. However, for the majority of retail investors trading typical stocks and ETFs, the activities are confined to the standard business week.
Overnight Trading on US Stock and ETFs
Overnight Trading Hours for US stocks and ETFs are from 8:00 pm ET to 3:50 am ET, with the first session beginning on Sunday at 8:00 pm ET and the last session ending on Friday at 3:50 am ET.
An Authorized Participant buys a large block of ETF shares on the open market and delivers those shares to the fund. In return, the Authorized Participant receives a pre-defined basket of individual securities, or the cash equivalent. Other investors purchase and sell ETF shares in market transactions at market prices.
Liquidation of ETFs is strictly regulated; when an ETF closes, any remaining shareholders will receive a payout based on what they had invested in the ETF. Receiving an ETF payout can be a taxable event.
Investors may trade in the Pre-Market (4:00-9:30 a.m. ET) and the After Hours Market (4:00-8:00 p.m. ET). Participation from Market Makers and ECNs is strictly voluntary and as a result, these sessions may offer less liquidity and inferior prices.
For instance, some ETFs may come with fees, others might stray from the value of the underlying asset, ETFs are not always optimized for taxes, and of course — like any investment — ETFs also come with risk.
Can you buy and sell ETFs after hours?
Many security types are available, including stocks, options, bonds, mutual funds, etc. Most listed and Nasdaq stocks and ETFs are available in pre-market and after-hours sessions.
Generally speaking, the best time to trade ETFs is closer to the middle of the trading day rather than the beginning or end.
| Symbol | Name | 5-Year Return |
|---|---|---|
| FNGO | MicroSectors FANG+ Index 2X Leveraged ETNs | 43.94% |
| TECL | Direxion Daily Technology Bull 3X Shares | 34.92% |
| SMH | VanEck Semiconductor ETF | 30.83% |
| ROM | ProShares Ultra Technology | 29.51% |
Some traders follow something called the "10 a.m. rule." The stock market opens for trading at 9:30 a.m., and the time between 9:30 a.m. and 10 a.m. often has significant trading volume. Traders that follow the 10 a.m. rule think a stock's price trajectory is relatively set for the day by the end of that half-hour.
One of the most popular and long-believed theories is that the best time of the week to buy shares is on a Monday. The wisdom behind this is that the general momentum of the stock market will, come Monday morning, follow the trajectory it was on when the markets closed.
Mondays: A Day of Adjustment
Historically, Mondays have often been considered a good day to buy stocks, primarily due to the 'Weekend Effect' or 'Monday Effect'. This theory suggests that stock prices tend to drop on Mondays due to negative news released over the weekend.
As ETFs are listed on stock exchanges, they can only be traded during the hours in which the market is open. Some brokers offer pre-market or after-hours trading, allowing traders to buy and sell a few hours before or after the market opens and closes.
ETF shares trade exactly like stocks. Unlike index funds, which are priced only after market closings, ETFs are priced and traded continuously throughout the trading day. They can be bought on margin, sold short, or held for the long-term, exactly like common stock.
After-hours trading is open to both institutional and retail investors, says Samuel Eberts, junior partner and financial advisor with Dugan Brown.
Exchange-Traded Funds (ETFs) are hybrids of open-end and closed-end mutual funds. Exchange-Traded Funds are open-end mutual funds that have no limit to the number of shares. The mutual fund company issues new shares as needed. However, they trade on the stock exchanges like closed-end mutual funds.
How do you know if an ETF is overpriced?
The price of an ETF share generally stays very close to NAV but if the share price is below the NAV, then the ETF is said to be trading at a discount. Conversely, if the ETF share price is more expensive than NAV, the ETF is said to be trading at a premium.
If you buy a stock ETF then yes, the ETF undoubtedly owns shares of the stocks. If you bought an ETF that tracked the S&P 500, for example, the ETF would own all 500 stocks in the index, in targeting the same proportion as the index holdings. However, if you own bond ETF you probably do not own many bonds.
It is unlikely for its asset to go up 100% in a single day and so, an ETF can't become zero. An ETF follows a particular index and the securities are present at the same weight in it. So, it can be zero when all the securities go to zero.
Because of their wide array of holdings, ETFs provide the benefits of diversification, including lower risk and less volatility, which often makes a fund safer to own than an individual stock. An ETF's return depends on what it's invested in. An ETF's return is the weighted average of all its holdings.
Hypothetically: Yes. Practically: No. ETFs are stocks which derive their values from the underlying stocks of net assets of an investment. These investments are not guaranteed and as such could ALL go to $0 in which your NAV would be $0.
