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Can I Buy Stock Before the Market Opens?

Original post by Rocco Pendola of Demand Media

The key U.S. stock exchanges operate daily regular sessions between the hours of 9:30 a.m. and 4:00 p.m., Eastern time, as of the time of publication. Extended hours trading refers to additional windows when these markets open for trading. As the name implies, the pre-market trading session refers to the window of time available for trading before the regular 9:30 a.m. market open.

Timing

American stock exchanges, such as the New York Stock Exchange (NYSE) and the NASDAQ market, permit pre-market trading. Hours for pre-market trading run from 4:00 a.m., Eastern time until the regular market open at 9:30 a.m., Eastern time.

Considerations

The brokerage with which you have a stock trading account and, quite possibly, the type of account you have with your brokerage, dictates your ability to trade in the pre-market. With some brokerages and accounts, you will not have the ability to engage in pre-market trading. At Charles Schwab, for instance, clients can place pre-market orders between 8:05 p.m., Eastern time, of the previous trading day until 9:25 a.m., Eastern time. Schwab executes these orders between 8:00 a.m. and 9:25 a.m., Eastern time prior to the opening of the regular trading session.

Risks

Several risks can get pre-market stock traders into trouble. As the NASDAQ.com website explains, liquidity becomes a problem with some stocks in the pre-market. This simply means refers to the possibility of a lower number of shares trading hands (volume), which might make it difficult for you to get buy and sell orders filled. This low volume can lead to more volatile stock prices, relative to the regular trading session. Along similar lines, the bid (the price you get for selling stock) and ask (the price you pay to buy a stock) spread is often wider in the pre-market than during the regular trading session. A wide bid/ask spread can cause you to sell stock at a much lower price or buy it at a much higher price than you would with tighter spreads during the standard 9:30 to 4:00 trading window.

Benefits

The main benefit of trading stocks in the pre-market -- as well as the after-market -- is that you can react more quickly to news. For instance, most companies report earnings either before or after the market closes. If you want to capitalize on a company's earnings report, it might be too late once the regular session opens. Often, the major move up or down in reaction to news comes before or after the market's normal operating hours.

                   

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About the Author

As a writer since 2002, Rocco Pendola has published numerous academic and popular articles in addition to working as a freelance grant writer and researcher. His work has appeared on SFGate and Planetizen and in the journals "Environment & Behavior" and "Health and Place." Pendola has a Bachelor of Arts in urban studies from San Francisco State University.

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