Late Trading (redirected from After hours trading)

Late trading

Late trading of mutual fund shares occurs when investors placing trades after 4 PM receive the 4 PM price. These late traders can use the information revealed after 4 PM to guide their trades: buying funds when their current value is greater than their 4 PM value and selling the funds when the reverse is true. Doing so allows them to earn expected abnormal returns at the expense of the fund's long-term shareholders.

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Late Trading

An illegal practice in which an investor buys or sells shares in a mutual fund at the previous trading day's price while having knowledge of the next day's net asset value. Mutual funds calculate their net asset values for the next trading day at the close of the previous day; this informs the next day's opening price. An investor commits late trading if, knowing this calculation, he/she buys or sells shares in the mutual fund in such as way as to profit off of the next day's opening price. It differs from after hours trading, which is legal. See also: Insider trading.