Why Apple’s Historical Gains May Come from Overnight Price Gaps
Summary
The document examines an analysis that decomposes Apple’s price changes into intraday moves, from open to close, and overnight moves, from one close to the next open. The author reports that the overnight component accounts for the net rise in the period studied, while summed intraday changes are negative. They also observe that overnight moves are positive more often, whereas larger moves occur more frequently intraday.
The answer links opening gaps to company news released around market close, including earnings, which investors can assess before regular trading resumes. It notes that extended-hours trading offers a way to react, with its own limitations. The explanation also distinguishes intraday trading, which seeks to capture moves during the session, from investing based on company developments. The post offers a single-stock observation rather than evidence that the pattern applies broadly; it does not establish whether the data or decomposition generalizes to other securities or periods.
Key ideas
- Separating close-to-open returns from open-to-close returns can reveal how gains accumulated over a chosen period.
- The author reports that Apple’s overnight returns were positive more often in the sample, while larger moves were more frequent intraday.
- News released near or after the close can be reflected in the next regular-session opening price.
- Intraday traders generally avoid overnight exposure because their strategies target moves within the trading session.
- The Apple observation alone does not show that overnight gains dominate for other securities or periods.
Tags
Full text
# Why most of apple stock price since 10years have been gained overnight? # Why most of apple stock price since 10years have been gained overnight? I've been playing with stock data and I've discovered a terrible truth : in 10 years apple stock price passed from roughly 3\$ to 100$. However this gain isn't due to intraday price variation `dayN_close - dayN_open` but the overnight variation `dayN_open - dayN-1_close`. In fact when you sum up the `intraday variation` since 10years you get roughly `-48$` drop in price (starting at 3\$ in 2004) while when you sum up the `overnight variation` you get `+148$` augmentation in price (148-48=100$ nowadays). This mean that the reason why apple stock price went from 3 to 100 in 10years is the overnight variation in price. This is quite unexpected, if there was no overnight variation the stock price would have died a long time ago... Why is that ? Why do they say that intraday traders close their position at then end of day while most gains can be done overnight (buy just before the market close and sell just after it opens). Is this observation true for other symbols too or is it specific to apple ? Edit : Well I performed some additional analysis and it turns out that the gain due to overnight variation is because over 10 years the frequency of the o/n variation being positive is by far superior to it being negative. As for the intraday variation the probability of it going downwards is slightly superior to it going upwards. However the variations that are high (>3% let's say) are more frequent intradaily. o/n variation tends to be small but steadily positive basically. As for the data I took it from nasdaq.com so I hope it isn't glitchy. ## Answer by pincopallino (score 3) https://quant.stackexchange.com/a/14823 This mean that the reason why apple stock price went from 3 to 100 in 10years is the overnight variation in price. This is quite unexpected, if there was no overnight variation the stock price would have died a long time ago... Why is that ? Have we been lying to us ? This is because many business and financial news are reported at market close, either pre-market or during after-hours. This includes quarterly and annual financial results. This allows financial operators to go through the material, analyze the data, digest the news and "price in" new information. Open prices "jump" wrt closing prices of the previous trading day on new, relevant, information released by the companies. As correctly suggested by @g_puffo, some trading venues offer extended hours trading (after-hours and pre-market). This is the case of the Nasdaq, where AAPL is listed: http://www.nasdaq.com/extended-trading/ Extended hours sessions give an opportunity to react on news, but there are several caveats: http://www.sec.gov/investor/pubs/afterhours.htm Why do they say that intraday traders close their position at then end of day while most gains can be done overnight (buy just before the market close and sell just after it opens). Is this observation true for other symbols too or is it specific to apple ? Intraday traders do not carry overnight exposures because.. well, they trade intraday. Their strategies are designed to profit from intraday market moves, determined by the market activity of other stock operators. They do not "invest", ie they do not aim at anticipate business developments and company financial news. This is why they liquidate their positions before/at market close.
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