Hello,

since stocks premarket starts trading at 4am EST, are the interplay/correlation influences between the stock index underlying instrument, stocks and stock index futures the same in this premarket interval starting at 4am than they are within regular trading hours?

brakkar 

Hello, since stocks premarket starts trading at 4am EST, are the interplay/correlation influences between the stock index underlying instrument, stocks and stock index futures the same in this premarket interval starting at 4am than they are within regular trading hours?

(a) I have no idea. I haven't traded stocks for years and I don't care what they do.

(b) You could run some charts yourself and see.

(c) The relationship between the stock indexes and the stock index futures is not accidental. In general, if someone has a large portfolio of stocks that somewhat matches one of the indices, they may want to hedge it against index futures. So when you talk about "stocks," it depends on which stocks you mean. Without having checked, my guess is that if you take a group of individual stocks that are widely held and are strongly represented in a particular index and then compare it to the futures contract for that index, they would be in reasonable step outside of regular hours, and would have to be. But "it depends" on which stocks you mean. If you are talking about just a few, and/or they don't generally match one of the indexes, then any match with the futures will be less, too.

(d) You do see interesting movement sometimes in a futures contract outside of regular hours when something big happens to a stock that is big in a particular index. Sometimes, for example, AAPL will have an unexpected announcement after the close, and then stock trading in AAPL as well as in futures trading in NQ (the Nasdaq index futures contract) may make big moves after the close. This is because AAPL is strongly represented in the Nasdaq index, which means it will also affect the NQ. Traders know this and will act accordingly. I assume that announcements or unexpected developments before the regular open would have a similar effect, but I can't think of any examples right now.

In general, I think that if you have any questions about whether the stock markets and the index futures markets will act in similar ways, the best way to answer the question is "yes." Regarding individual stocks, when volume is thin and/or you're talking about stocks that aren't big in a particular index, the answer will be "somewhat."

If you are interested in actually trading an individual stock pre or post market, and want to use futures as part of a strategy involving that stock, the answer obviously will depend on how well that stock tracks the index that the futures is tied to. This would also be a maneuver that would require a close knowledge of the market in that stock and of the associated index futures contract.

Bob.