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Investors Play The Time-Zone Advantage

Elizabeth Balboa

Crossing time zones is a profound inconvenience. Whether adjusting to a post-travel bedtime shift or calculating when to call your Pacific Time grandma, the process is a pain.

Yes, time zones are certainly inconvenient, but generally nothing more injurious. Until money comes into play.

The East Coast Edge

Proprietary trader and Bright Trading consultant Dennis Dick said there “is definitely an advantage for active traders to trade on the east coast” in a time zone aligned with Wall Street. Those waking later are prone to miss valuable investment news and subsequent profits.

Dick’s Bright Trading peers in Las Vegas have to start their workdays as early as 5:30 a.m. to prepare for the 6:30 PST open of the New York Stock Exchange, and even then, they fall behind. In fact, a 5:30 wake-up puts them two hours behind Dick in terms of market intelligence.

“My day starts at 6:30 a.m. EST, which gives me three hours to interpret overnight news and prepare for the market open,” he said. “A trader would have to get up at 3:30 in the morning to have three hours of prep time on the West Coast. Not sure that is doable.”

The Access Advantage

While time is a considerable factor, East Coast investors also entertain a potential locational edge.

“I think the real advantage of the East Coast is proximity to the insights and thinking,” Moneyball Economics’ Andrew Zatlin said. “New York is where things happen. Sure, the web has enabled other places to engage and interact, but more happens in New York. It's like saying web coding can happen anywhere, but the real leading edge stuff is in Silicon Valley.”

The Even Playing Field

Not everyone perceives a zone-based advantage, though. TD Ameritrade Chief Strategist JJ Kinahan said the field is fairly level.

“I really don’t think they have an advantage for a couple of reasons,” Kinahan said. “I think the West Coast people have adjusted, No. 1.”

Zatlin disagreed. “I suppose it's possible to adjust to the time difference, but it's definitely a problem,” he said.

Kinahan added to his thesis that, while East Coast investors likely held an edge maybe 10 or so years ago, the present, 24-hour nature of the market has virtually eliminated any information-based lead.

“[The second reason] is the advent of futures trading being around the clock now and some of the biggest stories happening overnight, if you think about Brexit, if you think about the election,” he said.

When news breaks after East Coast investors have logged off and turned in, West Coast investors are situated to profit.

Dick confirmed that S&P futures — the only major instrument trading between 8 p.m. and 4 a.m. EST — are highly exposed to late-night macro news, and West Coast traders are primed to benefit.

The West Coast Lead

The West Coast advantage is a theory Zatlin’s considered. He conjectured that retail investors could perform better out west where local companies see significant profits.

“I would be tempted to guess that the West Coast rules because our economies are more high-growth, and people tend to invest in what they know,” he said.

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