Night Futures and the Next Day Open

News that arrives overnight does not wait for the next open. United States inflation and employment figures, the rate decision and the swings of overseas equity markets all land while the Korean regular market is shut, and at night the reaction shows only in the futures price. So the last price of the night, seen before the regular market opens, tells you how the market digested the news while it was dark.

The change against the reference line is where that reading starts. If the last price of the night sits above the previous regular close, the market took the overnight news well, and if it sits below, it took it badly.

Between the close and the next open the cash index stands still, but the world does not. When the news that piled up in between is priced in all at once at the open, an empty stretch appears between the closing price and the opening price, and that is the gap. Night futures move the same news into the price a bit at a time through the night, so the night's price path lays that stretch out in advance instead of leaving it to appear in one step.

The night price does not settle the next day's opening price. Domestic news released just before the open, the foreign and institutional orders that come into the opening call, and the simple fact that the night book was thin can all turn the direction round in the morning. With few participants at night a small number of orders can push the price a long way, so there are days when a large overnight move is halved or gone by the morning.

That is why this screen treats the night price as a reference value and not as a statement about the morning. It shows which way the market leaned overnight, and it does not say where the regular session will open.

The night price makes more sense read alongside a few other things. How the United States market finished the same night, which way the won moved, and whether night volume was heavier or thinner than usual. If the price pulled away from the reference line on heavy volume, several participants moved the same way, and if it pulled away on thin volume, there is more room for it to come back in the morning.

Setting KOSDAQ 150 night futures beside it helps as well. If both contracts moved the same way, the news was probably market-wide, and if they split, it is worth considering that the news was confined to particular sectors.