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diamond wrote:
>
> A friend of mine bought 2000 shares of IOM at $12.25. He put in a stop
> loss. Because of a 2 cent dividend loss, the stock dropped to about $8.00
> in one day and he lost about $8000. The thing I don't understand, is that
> it was traded after hours. My friends stop-loss was useless.
>
> Can someone verity this? Can stocks be traded after wall street has closed
> for the day? Is the stop-loss only good during market open hours?
>
> I can't seem to find anyone in my area who knows about after hours
> trading.* I thought all trading stopped after the market closed. It does
> seem a bit shady if it is true. It gives someone somewhere a big advantage.
>
> Regards
> Zane Koir
> Abilene, Texas
> *
I don't want to sound cruel, but didn't your friend ask about these things prior
to using them? Stop-loss orders are not the absolute means of protection that
the name would imply. As your friend found out, aftermarket trading can damage
a position as well as after trading halts or gap downs at the beginning of the
trading day. If you have several hundred million dollars in equity, you can
sign up for instanet trading.
It does give some people a distinct advantage in being able to trade in the
after market (or before the open) hours, but the adantage cuts both ways. For
example, some idiot traded out of ETEC yesterday morning at 31 7/8 before the
market opened. By the time the market did open ETEC was trading at $37 and is
now at $45 and change. So if you could have traded in before market trading,
would you have held on, or dumped the stock.
Stop loss orders are not really a great means of protection if you are dealing
with volatile stocks that react to news with multipoint swings. These days they
are particularly dangerous if earnings announcements or pre-announcements are
swirling around.
Currently, with the focus on the Asian markets, it would be nice to have an
account in London and Japan to go long or short US stocks as the news moves
around the globe.
----
Dave
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