In the wild, wooly, dangerous world of after-hours trading, even iRobot's (Nasdaq: IRBT) friendly bots can turn into red-eyed Terminators.

The robot maker reported earnings for a pretty darn great second quarter last night. Sales ballooned 60% year over year, led by stellar demand for the government and industrial robot lines. Economies of scale kick in when a manufacturing company grows sales like that, boosting gross margins and everything below them on the income statement. In total, iRobot saw GAAP earnings explode from a $0.10-per-share loss a year ago to a $0.20-per-share gain this time around.

Based on these numbers, it's not hard to see why iRobot's stock is up a healthy 7% today. But that's only with the benefit of sleeping on the report. The stock price spiked as high as $22.41 per share overnight, for a stunning 17% increase. Sadly, that didn't last into the market's regular trading hours.

If you expected that mirage to last, you clearly haven't studied after-market moves much.

What happened?
iRobot just showed us why it's so dangerous to dabble in after-hours trading. The trading volume on iRobot after last night's closing bell was paper-thin, even for a company that doesn't attract much attention anyway. Buying or selling shares in the off-hours market under these conditions is subject to wild swings, because you might as well just go day trading on the Pink Sheets. I mean, take a look at this:

Company

3-Month Average Daily Dollar Volume

52-Week Range
(from low to high)

iRobot

$3.1 million

123%

Cell Therapeutics (Nasdaq: CTIC)

$3.8 million

1,425%

Jamba (Nasdaq: JMBA)

$2.0 million

290%

Microvision (Nasdaq: MVIS)

$1.8 million

199%

Source: Google Finance.

Here be dragons
Pick one of these wildly volatile stocks, open a five-day chart from your favorite financial service, and zoom in on the volume indicator. In after-hours action, they're all deader than a doornail. There were times last night when trades of a few hundred shares -- easily within the reach of many individual investors -- moved iRobot's share price by several percentage points.

Speculators are free to run wild in a market like that, manipulating the action with a few well-placed trades, and either winning big or losing big in the process. When the morning after rolls around, and properly managed market mechanisms take over the action, prices should stabilize to sane levels. In iRobot's case, that means retreating to a much more modest earnings-related pop.

Days with significant news, such as iRobot's earnings report, will probably attract a few hungry wolves in off-market hours, even for a small and relatively unknown stock like iRobot. Just don't go there, OK?

Did we mention these were very large dragons?
Don't think you're safe just because you're dealing in large-cap stocks with heavy volume, either. Even ultravoluminous stocks that shift billions of dollars on the market every day dampen down to easily manipulated levels after the closing bell. That includes Apple and its $7.4 billion daily dollar volume, and ExxonMobil's multibillion-dollar action.

If you touch any stock at all after the market closes, be sure to have a price in mind, and stick to it with limit orders. You're treading on dangerous ground, as a handful of intrepid iRobot owners with itchy market-order fingers can attest today.

Wrapping it up
Volatility can be your friend, but only if you treat it right. Options strategies and deft buy/sell strategies can make you money from wildly swinging stocks. After-market trading is a completely different animal that plays virtually no part in a sound volatility strategy. If that's how you plan to make your money in the stock market, I wish you the best of luck. That's not investing -- it's day trading, gambling, speculation, a stab in the dark. Not Foolish at all.

Just don't do it. You can double your money on a stock like iRobot without going to risk-laden extremes like after-hours trading.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. iRobot is a Motley Fool Rule Breakers selection. Apple is a Motley Fool Stock Advisor picks. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.