How You Can Buy the Dow Almost Anytime
Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.
The 30 stocks in the Dow Jones Industrials didn't trade on Thursday, enjoying the Thanksgiving holiday along with the rest of the U.S. stock market. But many investors don't realize that you can get exposure to the Dow in many ways that don't require the regular stock market to be open. Let's take a look at some of the alternatives to sticking around between 9:30 a.m. and 4 p.m. EST to place trades.
Before-hours and after-hours trading
Some stock exchanges offer trading sessions outside the normal hours. For instance, Nasdaq OMX starts pre-market trading at 4 a.m. EST, running until the market opens. It then has after-market hours that start when the market closes and go until 8 p.m. EST. On the other hand, NYSE Euronext's New York Stock Exchange only maintains regular trading hours, although its NYSE Arca exchange is also open as early as 4 a.m. EST and as late as 8 p.m. EST.
Some U.S. stocks are also listed on foreign exchanges. That allows traders with access to those foreign exchanges to buy and sell shares even when U.S. exchanges are closed.
Historically, cross-listing arrangements involving U.S. stocks didn't get much attention from investors. But with the merger of NYSE and Euronext, cross-listing has become more common, with Dow pharma stocks Merck and Pfizer among companies cross-listed on the exchanges, U.S. and European markets. Still, investors have to be extremely careful about liquidity, as there's no guarantee that extensive trading even in big-name stocks will happen overseas.
The CME Group's Chicago Board of Trade offers futures contracts on the Dow. With futures, you don't actually own the stocks in the Dow, but the value of the futures contract generally moves up and down with the average.
Dow futures contracts begin pre-open trading at 5 p.m. EST every Sunday, with electronic trading running from 6 p.m. EST Sunday through 9:15 a.m. EST Monday morning for the primary Dow futures contracts. Open-outcry floor trading for those futures runs from 9:30 a.m. to 4:15 p.m. EST weekdays, with electronic trading kicking in to cover most of the other times during weekdays.
Except for a half-hour period from 5:15 p.m. to 5:45 p.m. EST, Dow futures are available almost continuously from Sunday afternoon to Friday afternoon, when you include both regular and pre-open electronic trading. E-mini and so-called "Big Dow" futures are purely electronically traded but are available during the same times, including during the trading day.
Most investors are quite content to trade during normal hours. But it's good knowing that if you need to act quickly, there are alternatives you can consider to take advantage of changing conditions as they happen.
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The article How You Can Buy the Dow Almost Anytime originally appeared on Fool.com.
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