How is it that stocks are able to move while the markets are closed?

Question

I notice on a 5 day chart for, google, for examle, there are always large gaps inbetween days. I assume this has something to do with "futures", but I am completley unfamiliar with this concept as well. Wil someone please explain this to me?

Thanks.

Answer 1

Stocks are traded 45 min to 15 min before open on my online trade site. I see the bids jump around from 9:15 to 9:30 as well, so someone else has access to premarket durng that time. After-hours trading goes until some hour. Was it 8pm? I don't know, but I think off-hours trading is basically speculation by the clients of individual brokers, so your off-hours prices may vary from mine.

Those jumps in off-hours are the main reason why day traders sell out before the close of every day.

Answer 2

It does not have to do with futures. There are no futures contracts on specific stocks. A futures contract is placed on agricultural goods, financial goods (bonds), stock indexes, and currency exchange rates. I believe after hours trading occurs because with the technology today, people can place orders through online brockers while the market is closed. These orders do not go through until the market opens back up, but the price movements are visable during close. Think of it this way. Say google closed at 487.55 today. After the market closes very good news about Google comes out. The demand for Google stock is going to rise immediatly, the demand is not going to wait for the market to open.

Answer 3

I want you to stand on a street corner and watch people for thirty seconds. Now close your eyes for five seconds and open them. Did anyone move? How did they move when you did not observe their movement?

Stocks are like people -- their value is always moving. The only time we observe their value is when they trade. Just because they don't trade and we don't observe them doesn't mean that they don't change value.

Answer 4

Mingo is incorrect, there are futures contracts on individual stocks, they're called Single Stock Futures (SSF's) and were launched a few years ago. I like Random's answer.