The world of trading can be quite complicated, especially for those who are just starting out. One of the most frequently asked questions is whether or not you can close options after hours. In this article, we will explore this topic in detail and provide you with all the information you need to know.
What are Options?
Before we dive into the topic of closing options after hours, let’s first define what options are. Options are contracts that give the owner the right, but not the obligation, to buy or sell an underlying asset at a specific price and time. These underlying assets can include stocks, commodities, and currencies.
What are After Hours?
After hours, also known as extended hours trading, is the trading that occurs outside of regular market hours. Regular market hours are typically from 9:30 a.m. to 4 p.m. Eastern Time in the United States. After hours trading can occur before the market opens or after it closes.
Can You Close Options After Hours?
The short answer is no, you cannot close options after hours. Options trading is only available during regular market hours. This means that if you want to close an options position, you will need to do so during regular market hours.
Why Can’t You Close Options After Hours?
There are several reasons why you cannot close options after hours. The first reason is that the options market is not open during after hours trading. The second reason is that the liquidity in the options market is lower during after hours trading, which means that it may be more difficult to find a buyer or seller for your options position.
What Happens if You Don’t Close Your Options Position?
If you do not close your options position before the market closes, your position will remain open until the next trading day. This means that you will be subject to any price movements that occur overnight. Depending on the direction of the price movement, this could be either beneficial or detrimental to your position.
What are the Risks of Holding an Options Position Overnight?
There are several risks associated with holding an options position overnight. The first risk is that the price of the underlying asset can move significantly against your position, which could result in a loss. The second risk is that news or events that occur overnight can impact the value of the underlying asset, which could also result in a loss.
What Should You Do if You Can’t Close Your Options Position?
If you are unable to close your options position before the market closes, you may want to consider hedging your position. Hedging involves opening a position that is designed to offset the potential losses of your options position. This can help to reduce your risk and protect your portfolio.
In conclusion, options trading is only available during regular market hours, which means that you cannot close options after hours. While this may be frustrating for some traders, it is important to understand the risks associated with holding an options position overnight. If you are unable to close your options position before the market closes, consider hedging your position to reduce your risk.