Lessons › Markets of the world › United States: stocks, ETFs and extended hours
World 6 · Markets of the world · lesson 4 · level 2
United States: stocks, ETFs and extended hours
US stocks trade mainly from 9:30 to 4:00 New York time, with thinner trading before and after.
In one line
US stocks trade mainly from 9:30 to 16:00 New York time, with thinner trading before and after.
Explained simply
Think of a busy shop that also opens a small side door early in the morning and late at night. The main hours have the most shoppers and the best prices, while the side door has fewer people and prices can jump around. US stocks work the same way, with a main session and thinner extended hours.
The lesson
US shares and exchange-traded funds (ETFs) trade on several exchanges, with a main session from 9:30 to 16:00 Eastern Time and extended sessions outside those hours, where volume is usually thinner and spreads wider. Most trades settle one business day later (T+1), and you can buy a single share, with some brokers also offering fractions of a share. The Securities and Exchange Commission (SEC) oversees securities markets, FINRA oversees broker firms, and the Commodity Futures Trading Commission (CFTC) oversees futures. An ETF holds a basket of assets but trades on an exchange like a single share.
A worked example
Illustrative example: in pre-market a stock is quoted at 99.80 bid and 100.20 ask, a spread of 0.40 (100.20 minus 99.80). In the main session the same stock is quoted at 99.99 and 100.01, a spread of 0.02 (100.01 minus 99.99). Buying and then selling 100 shares at once would cost 40 in pre-market (100 times 0.40) but only 2 in the main session (100 times 0.02).
The same idea at four levels
- Beginner. US stocks and ETFs trade mainly from 9:30 to 16:00 New York time on weekdays.
- Foundation. Extended hours before and after the main session usually have thinner volume and wider spreads.
- Intermediate. Most US trades settle one business day later (T+1), and some brokers let you buy fractions of a share.
- Advanced. The SEC oversees securities markets, FINRA writes and enforces rules for broker firms, and the CFTC oversees futures.
- Expert. Experts treat extended-hours prices with care, because a thin market can show prices that the main session does not confirm.
Mistakes to avoid
- Treating extended-hours prices as if they had main-session liquidity.
- Confusing an ETF, which holds a basket of assets, with a single company's share.
- Forgetting that US hours move by one hour for viewers in India and Japan when US daylight saving changes.
Check yourself
What is the main US stock session in New York time?
9:30 to 16:00. That is the core session.
What is an ETF?
A fund that holds a basket of assets and trades on an exchange like a share. ETF stands for exchange-traded fund.
Which US regulator oversees futures markets?
The CFTC. The CFTC works under the Commodity Exchange Act.
What is usually true of extended-hours trading?
Thinner volume and wider spreads. Fewer traders means a thinner market.
When do most US stock trades settle?
One business day later (T+1). The US moved to T+1 on 28 May 2024.
Goal of this lesson: Know the basics of the US stock market: hours, instruments, settlement and regulators.