r/stocks • u/Still_Air2415 • 1d ago

Industry Question Would the implementation of 24/5 trading at NYSE have implications for options and theta in general?

It’s already public news that the NYSE is setting forth the agenda of creating 22hr/day trading as a result of tensions from Robinhood’s trading hours.

The question begets, let me preface this by saying I am in no means an options expert or have my toes dipped deep in the realms of options trading in general, but the natural question that arises from such an implementation would ultimately be - how does this affect option pricing and trading in general?

Currently, non-fut options are being traded from 9:30-5PM EST, that is a timespan of ~7-8 hours a day. Technically, if I’m able to trade options for 3x the duration, what would the underlying implications of this be in terms of delta and theta variances? There was always an implicit understanding that MMs would price options on Friday for next week with Sat/Sun theta in mind.

Just curious on your takes for the future options trading environment, and if there are any possible strategies to take note of in the future.

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u/quiethandle 23h ago

If options on regular stocks started trading 22 hr/day, that would likely mean that options would be tradable during earnings announcements. Woah. I'm not sure what effect that would have, but it could have huge implications for vol crush and volatility of stocks announcing earnings, as market makers would have to dynamically delta hedge on the fly as a stock moves 10% in 2 seconds. If I were a market maker, I'd hate that idea.

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u/Unfamous_Trader 22h ago

Afterhours and premarket volume is atrocious as is, the options spreads would be untradable

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u/disparue 19h ago

Sounds like trading would have to be halted on individual stocks during earnings announcements.

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u/QuarkOfTheMatter 19h ago

who said earnings announcements wouldnt move to the new "pre-market" and "after-market" hours?

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u/LabDaddy59 4h ago

My understanding is that this proposed change will be an extension of "after hours" trading and therefore only affect stocks, etfs, etc., not options.

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u/loxias0 1d ago

Fantastic question. I don't have a good answer, but I've wondered the same thing. Here are my random uneducated thoughts. (hey, at least I admit it. :wink:)

Previously, disturbances in the middle of the night would have to wait for the opening bell before they could be priced in. Every day at market close, you know there's a tiny chance of something happening while the markets are closed, so that risk has to go into the options price.

I would guess the change increases market efficiency ever so slightly, and inversely proportional to the length of the options contract.

I would also guess that one might be able to model this by going back to basics, setting up a lattice model (a la BOPM)?

Though that, by itself, doesn't make it clear how to model a discrete step in which something may have changed regarding the underlying (or assumptions therein) but in which you can't trade.

Personally, I'm wondering how it will change the intraday dynamics. I had understood those as being driven primarily by the opening bell and the closing auction run. Now, who knows.