January 26, 2009
Online Trading: Buying before the Stock Market opens?
Anas A asked:
Hi,
Is it possible if you have an online account in etrade, scottrade, or whatever other brokerage firm, CAN YOU BUY a stock before the stock market opens (“before ringing bell”) like an hour or two hours before for example at 7:30 AM or 8???
Hi,
Is it possible if you have an online account in etrade, scottrade, or whatever other brokerage firm, CAN YOU BUY a stock before the stock market opens (“before ringing bell”) like an hour or two hours before for example at 7:30 AM or 8???
They usually call it before market trading, so does your order not get through until market opens or can you buy the stock directly after you put your order in the online account..
Thanks
for example: TT shares went up 23% before market opened and it began rising from 8:00 AM,,, could I have bought some shares from my online account at that time???
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Comments on Online Trading: Buying before the Stock Market opens? »
Most online brokers will enable you to trade in the pre or post market, but you have to call to set it up. As a word of caution though, they typically charge a hefty fee, and the pre/post market typically has a huge bid/ask spread. Although you may gain an advantage from time to time in the off hours, over the long run it is a bad idea. In hindsight you could have bought TT cheaper, but more often than not you will find out you got a very bad price in the premarket. Good luck.
It can be done with pretty much any broker these days…but it usually requires signing a form acknowledging the risks (most of which are because of thin volume) plus going through some sort of special order process designating the order is for extended hours trading (that’s E-Trade’s name for it). I have accounts with Fidelity and Interactive, they both allow it…same commissions as for a regular session trade. I’ve never had to pay any extra fees to set up extended hours trading…although some brokers charge a larger commission on extended hours trades. I looked up E-Trade…they allow it, but charge you an extra $0.005/share in commission. I couldn’t find a reference to it on ScottTrade’s site…but I’d guess there is a way from them as well.
The thing about before and after hours trading is unless there is news, the volume is usually extremely light, and the spreads are usually quite wide. It is hard to get a good fill there…you’ve got to be careful, and enter only limit orders. The premarket hours are usually from 8-9:30 am eastern and aftermarket runs until about 8 p.m. eastern. Its worth knowing the procedures with your broker and having it set up so that if you see something you want, its all set to go. A call to your broker, or looking it up on the website ought to do it.
BTW, it looks like TT didn’t go much further than the open price, and actually finished below where it opened…within $0.06 of the low. It’s a takeover…usually, takeovers are priced at a slight discount from the offer price to allow for implied interest to the close date, and a risk premium of the deal falling apart. I wouldn’t chase that one unless you have some knowledge of how to value takeover plays.