Extended Hours Trading
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Risk of Lower Liquidity. Liquidity refers to the ability of
market participants to buy and sell securities. Generally,
the more orders that are available in the market, the greater
the liquidity. Liquidity is important because with greater
liquidity it is easier for investors to buy or sell securities,
and as a result investors are more likely to pay or receive
a competitive price for securities purchased or sold. There
may be lower liquidity in extended hours trading as compared
to regular market hours. As a result, your order may only
be partially executed, or not at all.
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Risk of Higher Volatility. Volatility refers to the changes
in price that securities undergo when trading. Generally,
the higher the volatility of a security, the greater its price
swings. There may be greater volatility in extended hours
trading than in regular market hours. As a result, your order
may only be partially executed, or not all, or you may receive
an inferior price in extended hours trading than you would
during regular market hours.
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Risk of Changing Prices. The prices of securities traded in
extended hours trading may not reflect the prices either at
the end of regular market hours, or upon the opening the next
morning. As a result, you may receive an inferior price in
extended hours trading than you would during regular market
hours.
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Risk of Unlinked Markets. Depending of the extended hours
trading system or the time of day, the prices displayed on
particular extended hours trading system may not reflect the
prices in other currently operating extended hours trading
system dealing in the same securities. According, you may
receive an inferior price in one extended hors trading system
than you would in another extended hours trading system.
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Risk of News Announcements. Normally, issuers make news announcements
that may affect the price of their securities after regular
market hours. Similarly, important financial information is
frequently announced outside of regular market hours. In extended
hours trading, these announcements may occur during trading,
and if combined with lower liquidity and higher volatility,
may cause an exaggerated and unsustainable effect on the price
of a security.
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Risk of Wider Spreads. The spread refers to the difference
in price between what you can buy a security for and what
you can sell it for. Lower normal liquidity and higher volatility
in extended hours trading may result in wider than normal
spreads for a particular security.
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