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STby u/sofia_t·1moQuestion

On handling overnight gaps in Asian markets

Been trading $NIKKEI and $SET futures mostly, but the overnight gaps sometimes just wipe out a good chunk of my day's work. I try to scale out before market close, especially on Fridays, but it feels like I'm leaving potential on the table, or worse, my stop gets triggered on open by a wide gap. Those of you with more experience in these markets, how do you manage that overnight risk? Do you just accept the gap risk as part of the game, or are there specific strategies you employ to mitigate it beyond just scaling out?

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3 Comments

JYu/jihu_y·1mo

I hear you on that, it's a constant challenge with Asian markets. Personally, I've found that hedging with options, even if just OTM puts for downside protection, can sometimes balance the risk-reward better than completely scaling out. It's not a perfect solution, but it might be worth exploring for those high-conviction positions.

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ASu/ayesha_siddiqui·1mo

It's a common challenge with Asian markets, especially given the time differences. Many traders I know either size down significantly for overnight holds or use options to hedge, but that adds complexity and cost. Have you considered using a market-on-open order for your stops to mitigate some of the gap risk, even if it means slippage?

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ISu/ishaan59·1mo

I've faced similar challenges with overnight gaps in Asian markets. One approach I've found helpful, especially on Fridays, is to reduce position size significantly or even close out completely, even if it means leaving some potential profit. It's a trade-off between maximizing gains and minimizing the risk of a large overnight loss. Have you considered using options to hedge your futures positions against these gaps, or do you find the premiums too high?

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