Concentrating on Overnight Stocks | Nasdaq

As U.S. market popularity grows, so too has the demand for 24-hour trading.

Studies of overnight trading show that liquidity and transparency is lower, resulting in less competition for spread compression and higher trading costs. 

That’s important for investors trading overnight as higher costs can eat away at returns. This, however, raises an interesting question: What stocks DO trade overnight – and are those stocks typically easier or harder to trade even during the day?

The data shows that overnight trading is highly concentrated in a (relatively) small subset of securities, primarily large exchange-traded products (ETPs) and large-cap tech stocks. The good news is those are also the stocks that have some of the lowest costs during the day.

Fewer stocks are traded into the night 

The U.S. equity market currently lists approximately 11,300 symbols. Most see some trading activity during a typical trading day (core market hours are 9:30 a.m. – 4:00 p.m. Eastern Time). In fact, on an average day, over 10,000 tickers trade more than $10,000.

The breadth of trading activity drops drastically outside core hours. 

Even during the most active extended hour period – from 4 p.m. – 8 p.m. – only 4,354 stocks (38.5% of the total listed securities) typically trade more than $10,000 in value.

During overnight hours, the number drops further, with only 644 stocks per day seeing more than $10,000 value traded. In fact, only 1,403 stocks typically see any trades, highlighting the concentration of activity overnight. 

Chart 1: Fewer stocks are traded during extended hours

Overnight trading volume is concentrated on ETPs and S&P 500 companies

If we look at the characteristics of the stocks traded in each trading session, we find that core trading hours see the most diversified volume distribution.

Chart 2: Overnight trading is concentrated on ETPs and S&P 500 companies  

Trading patterns in pre- and post-market sessions aren’t that different — although more ETFs trade in the morning. That’s also when some important macroeconomic news is released, so it may reflect that ETFs are cheap and effective tools, especially to reflect more macroeconomic news.

But overnight trading looks completely different. The majority of overnight trading is concentrated in ETFs and S&P 500 companies. In fact, only 7% of the volume comes from other companies. 

Earnings trading is seasonal

We have previously noted that the majority of earnings are announced outside core hours (with around 43% premarket and 57% post market). That results in some additional trading in those stocks outside core market hours; however, data shows that, on average, those tickers don’t dominate their trading sessions. Having said that, earnings are seasonal – and during earnings season our data shows that earnings stocks can reach as high as: 

• 10% of the pre-market value
• 20% of post-market value

Chart 3: Overnight trading is concentrated on ETPs and S&P 500 companies  

Top 15 symbols account for almost 55% of the overnight notional value 

Taking an even deeper dive, we look at the tickers that trade the most. The data in Chart 4 confirms how concentrated overnight trading is, notably: 

• The 15 most traded symbols account for almost 55% of the total overnight value.
• Twelve of those stocks are ETFs (interestingly, it includes trading in U.S. markets of foreign stock ETFs, at times when those foreign markets may themselves be open).
• In the period we looked at, NVDA, TSLA and BABA were the most popular individual stocks during overnight session, collectively accounting for 13% of the total value.  

Chart 4: Overnight trading led by S&P 500 ETPs and big tech names

Overnight trading is different

Perhaps not surprisingly, overnight trading is very different from intraday trading. Not just with lower liquidity, wider spreads and different rules, but, as this data shows, the type of stocks that trade is different, too.