Buying options before market open, possible?

G

ggelitetrader000

I was playing volatility game in desperation to get some lost ground lately and had a quite a bit of success last few days. Listed out couple of potential high volatility stocks storted by date. THere were definite tricks i.e. at least one stock had huge gain which I missed due to it is being announced after several days later than actual earning date.

I was planning to buy straddle for BABA which reports earnings before market open on 18th. It is too late as of today 17th. Screw me, yelled at myself. Now the question, I am thinking to pre-market if possible. Is it something that can be done in case of option trading? I am aware and accept the fact the most volatility happens between previous days close and next days opening. Huge help for any thoughts on this. Thanks!
 
I realize that this is completely inapplicable in your situation, because it would probably take weeks to open and fund an account, but, if you had a strategy that you wanted to scale that required trading options outside of US trading hours, maybe you could trade foreign options on US companies. I believe it is against US law for anyone to market foreign options to US citizens (and/or maybe US residents), except for certain "institutional" US traders, but not against US law if you find such brokerages without them marketing to you. For example, I see on swissquote.ch (with whom I have no business relationship, other than having thought of opening an account with them some time ago), that you can navigate to price quotes for options on BABA in Swiss Francs without needing to log in.
 
The quick answer to your question is - you can’t. The institutions that make markets in options know the exact minute that earnings are going to be released and they have been adjusting their option prices well in advance of the announcement. In fact, they know all of the major events and issues surrounding the stock (litigation, FDA approval, patents, Board of Director meetings, product release dates). Earnings can create major moves and they raise the implied volatility of the options. Speculators want to buy options in hopes of a big move. Investors want to buy puts to hedge their stock position. In short, as the uncertainty rises, the option premiums increase. The Market Makers have been planning for this moment. Depending on their risk exposure, they might even be trading the stock before the open.

Everyday options go through an opening rotation. On days when the stock and the market are quiet, that process is completed in a matter of minutes. On days when there is a major move, it could take 10 to 15 minutes. When they begin trading, the price movement has been completely factored in. Remember, the Market Makers hold all of the cards. They determine the bid and the ask for each option.

Buying the options after the open during a big move is a risky proposition. The option premiums are inflated and the stock can whipsaw violently. The better trade after a large gap is to wait for a failed bounce a few days later (assuming that you believe that move will continue). The implied volatilities will be lower and the stock will be trading in a more orderly fashion.

Perhaps the biggest issue with your question is the assumption of making fast money. Options might be new to you, but the professionals who make markets have been trading them for decades. They will NEVER put themselves in a position to get “picked off”. There is no easy way to make money in options. It all requires extensive research and due diligence.

Thank you for your question.
 
ggelitetrader000 said:
I was playing volatility game in desperation to get some lost ground lately and had a quite a bit of success last few days. Listed out couple of potential high volatility stocks storted by date. THere were definite tricks i.e. at least one stock had huge gain which I missed due to it is being announced after several days later than actual earning date.

I was planning to buy straddle for BABA which reports earnings before market open on 18th. It is too late as of today 17th. Screw me, yelled at myself. Now the question, I am thinking to pre-market if possible. Is it something that can be done in case of option trading? I am aware and accept the fact the most volatility happens between previous days close and next days opening. Huge help for any thoughts on this. Thanks!
More...

For equities, the simple answer is NO. Option only trade during regular trading hours and only when the underlying stock is open and trading on the primary exchange.

As toonerdy has stated, there might be ways to trade overseas that I'm not aware of. If that is true, I expect those options will be less liquid and wider markets as you can't hedge in size until regular market hours.
 
As Robert stated, no equity options traded here overnight. SPX and VIX options are traded between 2am and 815am ct.
 
You can trade options on futures in your existing IB account with cross margining as it is both a securities and commodities account. ES the emini sp500 options on futures trade about 23 hours a day.
 
AlinaLee said:
The quick answer to your question is - you can’t. The institutions that make markets in options know the exact minute that earnings are going to be released and they have been adjusting their option prices well in advance of the announcement. In fact, they know all of the major events and issues surrounding the stock (litigation, FDA approval, patents, Board of Director meetings, product release dates). Earnings can create major moves and they raise the implied volatility of the options. Speculators want to buy options in hopes of a big move. Investors want to buy puts to hedge their stock position. In short, as the uncertainty rises, the option premiums increase. The Market Makers have been planning for this moment. Depending on their risk exposure, they might even be trading the stock before the open.

Everyday options go through an opening rotation. On days when the stock and the market are quiet, that process is completed in a matter of minutes. On days when there is a major move, it could take 10 to 15 minutes. When they begin trading, the price movement has been completely factored in. Remember, the Market Makers hold all of the cards. They determine the bid and the ask for each option.

Buying the options after the open during a big move is a risky proposition. The option premiums are inflated and the stock can whipsaw violently. The better trade after a large gap is to wait for a failed bounce a few days later (assuming that you believe that move will continue). The implied volatilities will be lower and the stock will be trading in a more orderly fashion.

Perhaps the biggest issue with your question is the assumption of making fast money. Options might be new to you, but the professionals who make markets have been trading them for decades. They will NEVER put themselves in a position to get “picked off”. There is no easy way to make money in options. It all requires extensive research and due diligence.

Thank you for your question.
More...
I agree. Trades around events never worked for me so I avoided them.
 
just21 said:
ES the emini sp500 options on futures trade about 23 hours a day.
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Actually about 23 hours and 45 minutes a day with a trading halt from 4:15 pm - 4:30 pm (CST)

From the CME's website;

upload_2017-5-18_22-59-31.png
 
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