Overnight drift

Checked October 2026

The overnight drift is long equity-index futures from 2:00 to 3:00 a.m. New York, and flat the rest of the day. Boyarchenko, Larsen and Whelan wrote it up in a New York Fed staff report in 2022. Backtoast ran it. The published version failed our test, losing 1.7% a year over 3,865 trades.

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Overnight drift

The trade is one hour a night, 2:00 to 3:00 a.m. New York. The paper finds the hour moves to 4:00 to 5:00 a.m. in the few weeks a year when US and European clocks change on different dates.

The run bought ES, NQ and YM at 2:00 and sold at 3:00 every trading day, paying the spread both ways.

The other clock-based index futures trade here is last half hour momentum, from 3:30 to 4:00 p.m.

When it works

The paper ties the drift to dealers who absorb selling at the US close and unload it once European traders arrive around 2:00 a.m., so it's biggest after a sell-off into the close and when the VIX is high. Traders still look at it because it holds one hour a night, far less exposure than holding the index all day. The paper's best version held from 1:30 to 3:30 a.m. only after a sell-off into the close, and it stayed profitable after the spread through 2020 because it traded about half the days.

Origins

Boyarchenko, Larsen and Whelan found 3.7% a year from 1998 to 2020 before costs, and a loss once the bid-ask spread was paid. A July 2026 New York Fed post, The Disappearing Overnight Drift, says the drift in ES, NQ and YM has been close to zero since 2021, which is the stretch this run sits in.

The run is Backtoast's, from 29 October 2026, after costs.