How frustrating is this?

A company reports earnings after the close…

A CEO makes a major product announcement in the early hours of the morning…

A regulatory decision is announced overnight…

A geopolitical event unfolds while U.S. markets are asleep…

The stock moves 5%, 10%, or even 20% before most options traders are even allowed to react.

All of these frustrations deal with timing.

But that’s all about to change.

Beginning July 13, the CBOE plans to expand trading hours for select options, creating new opportunities for traders to react to market-moving events outside of traditional market hours.

The initial list includes some of the market’s most actively traded names: AAPL, AMD, AMZN, AVGO, BABA, GOOG, GOOGL, HOOD, INTC, META, MSFT, MU, NFLX, NVDA, ORCL, PLTR, and TSLA.

This has been kept fairly quiet, but it’s sure to open new opportunities for options traders.

Consider a stock like Intel.

Just this morning, the White House announced that Intel would be providing new chips for Apple products. The news hit at 6:45 AM ET, almost three hours before the markets opened.

Shares traded more than 9% higher before 7:00 AM and continued to rise.

That’s great for stock traders that are buying and selling the stock in extended hours.

But options traders were forced to wait until the 9:30 AM opening bell before they could react.

The move was already over.

But come July 13, prepared traders can respond while an event is still unfolding… rather than accept whatever price the market offers when the bell rings.

This is particularly important for traders who actively use options for hedging.

Imagine holding a large position heading into earnings.

Historically, if unexpected news emerged overnight, your ability to adjust the hedge was limited.

This new timing advantage may prove to be one of the most valuable tools in an options trader’s arsenal.

Here’s the Catch

Of course, every opportunity comes with tradeoffs.

Extended-hours trading will almost certainly feature lower liquidity and wider bid/ask spreads than traders are accustomed to seeing during regular market hours.

Market makers face greater uncertainty overnight, which typically results in more conservative pricing… for them.

This means traders can’t simply assume that every quoted option price represents fair value.

In fact, one of the most important skills options traders can develop is the ability to estimate an option’s theoretical value before entering a trade.

I’ve long recommended using an options calculator to determine the fundamental value of an option based on factors such as implied volatility, time to expiration, and the price of the underlying stock.

Do this for every trade you are considering!

Doing so allows you to compare what an option should be worth versus what the market is currently offering.

In many cases, that comparison will tell you to walk away.

However, there are situations where paying a premium above theoretical value may be justified.

Timing has value. If a trader believes an overnight event is creating a significant opportunity, paying slightly above fair value may still be the correct decision if it provides access to a move before the broader market fully reacts.

The key is understanding the difference between intentionally paying for a timing advantage and blindly overpaying because liquidity is thin.

Turn the Extended Options Market in Your Favor

There is another side to this equation that many traders overlook.

While wider bid/ask spreads can create challenges for option buyers, they can also create opportunities for option sellers.

Options pricing is driven by supply and demand.

During extended trading hours, lower liquidity and heightened uncertainty can occasionally cause options to trade at prices that are significantly above their theoretical value.

Most traders see this as a problem. Experienced premium sellers may see it as an opportunity.

Imagine a stock that releases earnings after the close and experiences a sharp move higher.

Traders rush to buy calls to capture additional upside while market makers widen spreads to account for the increased risk. The result? Inflated option prices relative to fundamental value.

For traders willing to sell premium, that inflation can become an advantage.

Cash-secured put sellers may be able to collect higher-than-normal premiums while establishing a desired entry price on a stock they’d be willing to own anyway.

Covered call writers may find opportunities to generate additional income by selling options at prices that reflect elevated demand and uncertainty.

In other words, the same illiquidity that creates challenges for buyers can sometimes create opportunities for sellers.

YOUR ACTION PLAN

The CBOE’s rollout of extended trading to this initial group sets the stage for a more continuous marketplace.

Active traders are gaining a new tool, one that provides greater flexibility, improved risk management capabilities, and the ability to respond to events as they happen rather than after the fact.

The biggest winners from extended-hours options trading won’t be the traders chasing overnight headlines… They’ll be the ones who understand how to capitalize on pricing mistakes those headlines create.