The price gap between Tokyo Stock Exchange and ADR/PTS markets can indicate potential trading opportunities.
Understanding the Gap:
- Positive Gap (+%): ADR/PTS price is higher than Tokyo price
- Negative Gap (-%): ADR/PTS price is lower than Tokyo price
Trading Strategies:
1. Arbitrage Opportunity
Large gaps may correct over time. If ADR is significantly higher than Tokyo, the gap often narrows when Tokyo market opens.
2. Market Sentiment Indicator
After-hours price movements (PTS/ADR) can signal how Tokyo will open the next trading day.
3. Currency Impact
Exchange rate fluctuations affect the gap. Monitor USD/JPY movements alongside price gaps.
Important Notes:
- Gaps are normal and typically range from -2% to +2%
- Large gaps (>3%) may indicate significant news or events
- Always consider trading fees and currency conversion costs
