Market Futures when most people start making investments outside of their retirement plans, they focus on buying stocks, exchange-traded funds (ETFs) and similar assets that are accessible to new investors during normal trading hours each day. However, a significant amount of activity and analysis actually happens outside of that window. One example of this type of investment is pre-market futures.
If you’re looking for investment tips and ideas beyond the traditional options, it can help to understand what pre-market futures are. Take a look into how they work and what they mean to investors to decide if you might want to begin utilizing them.
What Are Pre-Market Futures?
Pre-market futures are contracts that serve as commitments to buy or sell a particular investment on a set date in the future for a specific price. For example, you might formally agree to purchase ten shares of a stock for $50 apiece one week from the contract’s creation date. Regardless of the market price for the stock at the time the contract comes due, you’ll pay $500 to secure all ten shares. If the market price of the stock drops over that week, you might end up paying more for the shares than they’re worth. Conversely, you might get a good deal if the actual value of the stock rises over the week and the shares grow to be worth more than $500.
Usually, pre-market trading begins at 8 a.m. Eastern and runs until 9:30 a.m. Eastern. Pre-market futures are traded during that specific window. Futures and stocks don’t trade together, though. Instead, futures activities happen through different marketplaces. Additionally, various marketplaces may specialize in a specific kind of future. For instance, the New York Mercantile Exchange (NYMEX) focuses on commodities like metals.
Further, pre-market trade activities can happen over different electronic communication networks (ECNs). These don’t have physical buildings like you find with the New York Stock Exchange (NYSE). Instead, they’re purely digital landscapes that allow traders to connect outside of normal trading hours.
