As the popularity of American market increases, there is also a demand for 24-hour business.
The study of overnight trading suggests that liquidity and transparency are low, resulting in dissemination compression and less competition for high trade costs.
This is important for investors to trade overnight as high cost can eat away on returns. This, however, raises an interesting question: which stock trading throughout the night – and are those stocks usually easy or difficult to do during the day?
Data suggests that overnight trading is highly concentrated in a (relatively) small, large exchange-traded products (ETPs) and large-cap tech stock stock of securities. The good news is that they are also stocks that have the lowest cost during the day.
Low shares are traded at night
The US equity market currently lists around 11,300 symbols. Most see some trading activity during a specific trading day (core market hours at 9:30 am – 4:00 am). In fact, on an average day, more than 10,000 tickers trade more than $ 10,000.
The width of trading activity falls largely outside the core hours.
Even during the most active extended hour period – 4 pm to 8 pm – only 4,354 stocks (38.5%of the total listed securities) usually trade more than $ 10,000 in the price.
During the nights overnight, the number moves forward, with only 644 shares per day trading more than $ 10,000. In fact, only 1,403 stocks typically look at any trade, which highlight the concentration of overnight activity.
Chart 1: Low shares are traded during extended hours
Overnight trading volume focuses on ETP and S&P 500 companies
If we look at the characteristics of shares traded in each trading session, we find that core trading hours see the most diverse amounts of distribution.
Chart 2: Overnight trading focuses on ETPS and S&P 500 companies
Trading patterns are no different in pre-and subsequent market sessions- although more ETFs trade in the morning. This is still when some important macroeconomic news is released, so it can reflect that ETFs are cheap and effective equipment, especially to reflect more comprehensive economic news.
But the trading looks completely different throughout the night. Most of the overnight trading focuses in ETF and S&P 500 companies. In fact, only 7% of the volume comes from other companies.
Earning business is seasonal
We have earlier noted that most of the earnings are declared outside the main hours (about 43% of premarkets and 57% post market). As a result, some additional trading core market in those stocks out of hours; However, data suggests that, on average, they do not dominate their trading sessions. Saying that, earning is seasonal – and during the earnings season our data shows that earning shares can reach:
- 10% of pre-market value
- 20% price after market
Chart 3: Overnight trading focuses on ETPS and S&P 500 companies
Top 15 symbols have a value of 55% overnight
Taking a even more deep dive, we look at the tickers that trade the most. Data in chart 4 confirms how centered the night trading is, especially:
- The 15 most traded symbols are about 55% of the total overnight value.
- Of those shares are twelve ETFs (interestingly, it involves trade in foreign stock ETF American markets, many times when they may open foreign markets themselves).
- The period we saw, NVDA, TSLA and Baba were the most popular individual stock during overnight session, collectively accounting for 13% of the total value.
Chart 4: Night -overnight trade led by S&P 500 ETP and big technical names
Trading is different overnight
Perhaps it is not surprising, trading overnight is very different from intraday trading. Not only with low liquidity, widespread spread and different rules, but, as it shows this data, the type of stock that is different, also.
