Can You Sell an Option After Hours?

Options trading in the United States adheres to specific market hours, prompting questions about selling options after the regular trading day concludes. While extended-hours trading exists for stocks, the landscape for options is distinctly different due to their market structure and pricing mechanisms.

Standard Trading Hours for Options

Most options contracts on major U.S. exchanges, such as the Cboe Options Exchange and Nasdaq Options Market, trade during standard market hours, typically from 9:30 a.m. to 4:00 p.m. Eastern Time (ET), Monday through Friday. This aligns with regular trading sessions for underlying stocks, meaning direct trading activity for most equity and exchange-traded fund (ETF) options ceases at 4:00 p.m. ET.

There are, however, limited exceptions to these standard hours. Certain index options, like the Cboe S&P 500 Index (SPX) options and Cboe Volatility Index (VIX) options, offer Global Trading Hours (GTH) and Curb Trading Hours. The GTH session can extend from 8:15 p.m. to 9:15 a.m. ET, and the Curb session from 4:15 p.m. to 5:00 p.m. ET, Monday through Friday. These extended sessions are specific to a few highly liquid index products and do not apply to the broader universe of equity options.

Why Options Differ in Extended Hours

Options do not trade after regular market hours like stocks due to their complex nature as derivative instruments. Options derive their value from an underlying asset, and their pricing models rely on continuous, real-time data from a liquid market. When the underlying stock market is closed or experiences significantly reduced activity, the accuracy and reliability of these pricing inputs diminish.

The Options Clearing Corporation (OCC) acts as a guarantor for all cleared options contracts. The OCC steps in between buyers and sellers, ensuring that the obligations of the contracts are fulfilled, thereby eliminating counterparty risk. This robust clearing and settlement process is designed for the structured environment of regular trading hours. Extending it to after-hours trading for all options would require a significant overhaul of the market infrastructure, including the systems used by the OCC.

After-hours stock trading occurs on Electronic Communication Networks (ECNs), which match buy and sell orders. While ECNs facilitate extended trading for stocks, they are not widely available for options in the same capacity. The lack of widespread ECNs for options after hours contributes to lower liquidity, wider bid-ask spreads, and increased price volatility. This reduced liquidity makes it challenging to execute trades at fair prices and can lead to substantial price gaps, making after-hours options trading impractical and risky.

Managing Positions Outside Regular Hours

Since direct selling of most options after regular hours is not possible, traders must manage their positions during regular market hours or prepare for the next session. Using “Good ‘Til Cancelled” (GTC) orders is a common approach. A GTC order remains active until it is filled or the investor cancels it, often for a period of 30 to 90 days, though this can vary by brokerage. This allows traders to set a desired price for selling an option that will be active when the market reopens, without needing to re-enter the order daily.

Traders should monitor news and events that occur outside of market hours, as these can significantly impact the underlying stock’s price and, consequently, the option’s value at the next market open. Pre-market and after-market movements in the underlying stock can influence the opening price of options, potentially leading to price gaps. Understanding these potential shifts helps traders anticipate how their option positions might be affected when trading resumes. While direct intervention is limited, being informed allows for strategic planning of actions for the upcoming trading day.