E*TRADE After Hours Trading Agreement: What You Need to Know
E*TRADE is a popular online brokerage firm that offers its customers a range of investment products and services, including after hours trading. This type of trading allows investors to buy and sell stocks outside of regular market hours, which can be particularly useful for those who are unable to trade during the day.
However, before you engage in after hours trading with E*TRADE, it is important to understand the terms and conditions of their after hours trading agreement. This agreement outlines the risks and limitations associated with after hours trading and helps ensure that investors are aware of the potential consequences of engaging in this type of trading.
Here are some key points to keep in mind when reviewing E*TRADE`s after hours trading agreement:
1. Risks of after hours trading: E*TRADE`s agreement highlights the potential risks of after hours trading, including lower liquidity, wider spreads, and increased volatility. Because fewer traders are active during after hours trading, the bid-ask spread on individual stocks may widen, making it more expensive to buy or sell shares. Additionally, there may be more volatility in the market during after hours trading, which could lead to larger price swings.
2. Limited order types: E*TRADE limits the types of orders that customers can place during after hours trading. Specifically, customers may only place limit orders, which specify the maximum price that they are willing to pay to buy a stock or the minimum price that they are willing to accept to sell a stock. Market orders, which execute at the best available price, are not allowed during after hours trading.
3. Reduced order volume: E*TRADE also limits the volume of orders that customers can place during after hours trading. Specifically, customers may only place orders for up to 5,000 shares of stock during after hours trading. This is significantly lower than the standard limit of 25,000 shares during regular market hours.
4. Fees and commissions: E*TRADE charges higher fees and commissions for after hours trading compared to regular market hours. Specifically, customers will be charged an additional $0.005 per share for orders placed during after hours trading. This fee is in addition to the standard commission that E*TRADE charges for stock trades.
5. Availability: Finally, it`s important to note that not all stocks are available for after hours trading. E*TRADE restricts after hours trading to a select number of stocks, including those listed on the S&P 500, NASDAQ 100, and Dow Jones Industrial Average.
In conclusion, after hours trading can be a useful tool for investors who want to take advantage of market movements outside of regular market hours. However, it`s important to understand the terms and conditions of E*TRADE`s after hours trading agreement before engaging in this type of trading. By being aware of the potential risks and limitations of after hours trading, you can make informed decisions about how to invest your money.