Robinhood Markets Inc. HOOD 24.20%
said it is extending the hours it will let its users trade to between 7 am ET and 8 pm ET, an announcement that sent the stock surging Tuesday amid hopes that the investment platform can rebound from slowing growth.
The brokerage, which is popular with individual investors, is expanding its trading hours in an attempt to combat slowing growth tied to its trading revenue. The company previously only allowed for a half hour of trading before the market opened and two hours after the market closed.
The extended trading hours in the morning and the evening put Robinhood’s availability more in-line with other traditional brokerage firms.
“Robinhood’s trying to provide as much access as possible to their clients to trade the markets,” said Rich Repetto, a managing director at Piper Sandler who follows online brokers.
Robinhood’s investing app grew in popularity during the Covid-19 pandemic as millions of new investors dabbled in investing, attracted to meme stocks such as GameStop Corp.
and cryptocurrencies such as bitcoin and dogecoin. The company said in January that it has 22.7 million customers with funded accounts, up from 12.5 million in 2020.
But much of that growth came in the first half of last year. Maintaining that momentum has proved challenging. The company also faces stiff competition from traditional asset managers and brokerages like Fidelity Investments and Charles Schwab Corp.
Brokerages and investment professionals caution that extended-hours trading can be riskier than during the regular session. Trading outside of normal market hours can be thinner, making it more difficult to execute trades and more likely that prices exhibit wide swings.
“You’re taking a bigger chance by trading in after-hours,” said Michael Sheldon, chief investment officer at investment advisory firm RDM Financial Group. “There’s basically greater volatility.”
Robinhood said Tuesday’s announcement was in response to customer demand. The company is working toward offering 24/7 investing, but didn’t offer a timeframe for when that would be available.
“Our customers often tell us they’re working or preoccupied during regular market hours, limiting their ability to invest on their own schedule or evaluate and react to important market news,” Robinhood said in a blog post. “They’re juggling a lot, from full-time jobs to school, families and side gigs.”
Alex Matuszak, a 23-year-old biological technician in the Minneapolis area, says he started trading in the summer of 2020. Mr. Matuszak, who says he trades daily, said he felt restricted by Robinhood’s limited hours.
“I’m more likely to trade on Robinhood now than ever before,” said Mr. Matuszak, who switches between Robinhood and Webull, a stock-trading app.
Investors trading pre-market or after-hours may have to operate without as much timely information from other markets or from news sources, analysts say.
“After hours it’s almost like driving in the dark,” said Sam Stovall, chief investment strategist at CFRA. “You have to be just more vigilant, more on your guard as to the twists and turns of the market.”
Robinhood’s new trading hours are similar to many of its competitors. Fidelity says it starts accepting customers’ premarket orders at 7 am ET and accepts after-hours trades from 4 pm to 8 pm ET. Charles Schwab offers nearly 24/7 trading.
“The risk for the user is you have to really understand how the extended traded market operates,” said Joe Artim, director of the financial markets program at University of Minnesota Duluth’s Labovitz School of Business and Economics.
—Will Feuer contributed to this article.
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