For traders looking for outsized returns, the hunt for power hour stocks usually starts right about now. Power hour is loosely defined as the last part of the trading day. That said, many traders do in fact focus a significant amount of attention on the last trading hour of a given day.
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Why’s that?
Well, many investors have heard the phrase “accelerating into the close” when it comes to a given stock. In many cases, the volatility that’s seen throughout a given trading day is amplified near the end of the day. This is due to a variety of factors, and we’ll get into those next.
5 Things to Know About Power Hour Stocks
- Monday and Friday are typically seen as having the most volatile power hours throughout the week. This is related the fact stocks don’t trade on weekends. Pent-up trading demand on Monday following the weekend typically leads to an exciting power hour. However, Friday’s power hour is typically the most volatile. This is because traders often close out positions (such as expiring options contracts) on Friday before the close.
- Accordingly, companies with pending announcements or news that may come over the weekend may be more volatile during Friday’s power hour. Additionally, stocks with high options volumes can also be affected heavily on Friday.
- For traders considering options expiring on a Friday, large swings in value can be determined by a relatively small stock price move. Accordingly, investors often focus on Friday’s power hour as a key trading time to maximize leverage to stock price swings.
- Additionally, by limiting trading to a specific hour or two in a day, traders can free up their time for research or other activities throughout the day to support their analysis. Indeed, analysis is a key piece of trading stocks. Devoting more time to research is a good thing.
- For long-term investors, power hour is really a non-issue. However, for traders, taking advantage of volatility is everything.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.
