DEFINITION of 'Change'

Change can refer to many things in finance. For an options or futures contract, it is the difference between the current price and the previous day's settlement price. For an index or average, change is the difference between the current value and the previous day's market close. For a stock or bond quote, change is the difference between the current price and the last trade of the previous day. For interest rates, change is benchmarked against a major market rate and may only be updated once a quarter.


Change is a commonly used term in the world of finance, though it has many names. Another word for change is volatility. The change in earnings is described as earnings growth. The change in revenue is referred to as revenue growth. The change in earnings divided by an investment such as assets or equity is referred to as return on investment or return on assets. In essence, change is the foundation for measuring and describing data over a certain period of time. A positive change generally implies improved performance, while a negative change implies declining performance. The interpretation of the change is left to the analyst.

Calculating Change

In general, the formula for determining change is subtracting the previous time period from the most recent time period. For example, if a company is trading at $10 at the end of the first quarter and $20 at the end of the second quarter, the change in price over the time period is $20 minus $10, or $10.

It is important when describing this change to give it context. In this case, the change is positive, but by how much? To compare change, analysts divide the change in price by the price in the previous time period. In this example the calculation is $10 divided by $10. The price went up from $10 to $20, so it doubled. Likewise, $10 divided by $10 is 100%. Another way to report this change is to say the company's stock price grew 100% in the first quarter.

The Value of Change

From an investment perspective, investors, and particularly traders of options, like change. Change is what allows investors to make a profit. In highly volatile markets, investors have many opportunities to make up for losses. Option prices are based on the change in price of the underlying asset. In other words, option value is based on changing prices. Some options, referred to as calls, place a bet the price of the underlying asset will go up, while some options, referred to as puts, bet the price of the underlying asset will go down. The more volatility there is in the market, the more likely option holders make a profit. As a result, implied option prices increase with volatility.

  1. Price Change

    The difference in the cost of an asset or security from one period ...
  2. Previous Close

    A security's closing price on the preceding day of trading. Previous ...
  3. Implied Volatility - IV

    The estimated volatility of a security's price.
  4. Vega

    The measurement of an option's sensitivity to changes in the ...
  5. Net Change

    The difference between the closing price of a security on the ...
  6. Volatility Arbitrage

    Trading strategies that attempt to exploit differences between ...
Related Articles
  1. Trading

    Understanding Vega

    In options trading, vega represents the amount option prices are expected to change in response to a change in the underlying asset’s implied volatility.
  2. Trading

    Sensitivity Analysis For Black-Scholes Pricing Model

    Trading options requires complex calculations, based on multiple parameters. Which factors impact option prices the most?
  3. Trading

    What is Meant by Implied Volatility?

    The estimated volatility of a security's price.
  4. Trading

    The Anatomy of Options

    Find out how you can use the "Greeks" to guide your options trading strategy and help balance your portfolio.
  5. Trading

    Implied Volatility: Buy Low And Sell High

    This value is an essential ingredient in the option pricing recipe.
  6. Trading

    How & Why Interest Rates Affect Options

    The Fed is expected to change interest rates soon. We explain how a change in interest rates impacts option valuations.
  7. Trading

    Stock Options: What's Price Got To Do With It?

    A thorough understanding of risk is essential in options trading. So is knowing the factors that affect option price.
  8. Small Business

    How to Manage Corporate Change in the Modern Economy

    Change can make employees uncomfortable, but these keys can help ease the transition and increase morale.
  9. Trading

    Implied vs. Historical Volatility: The Main Differences

    Discover the differences between historical and implied volatility, and how the two metrics can determine whether options sellers or buyers have the advantage.
  10. Trading

    The Forex Greeks And Strategies

    We look at the different kinds of Greeks and how they can improve your forex trading.
  1. How does implied volatility impact the pricing of options?

    Learn about two specific volatility types associated with options and how implied volatility can impact the pricing of options. Read Answer >>
  2. Can delta be used to calculate price volatility of an option?

    Learn how implied volatility is an output of the Black-Scholes option pricing formula, and learn about that option formula's ... Read Answer >>
  3. How should an accountant correctly record and report a change in an accounting estimate?

    Read about how the FASB treats a change in accounting estimate and what businesses are required to report or disclose when ... Read Answer >>
  4. Are put options more difficult to trade than call options?

    Learn about the difficulty of trading both call and put options. Explore how put options earn profits with underlying assets ... Read Answer >>
  5. Do options make more sense during bull or bear markets?

    Understand how options may be used in both bullish and bearish markets, and learn the basics of options pricing and certain ... Read Answer >>
  6. How do the investment risks differ between options and futures?

    Learn what differences exist between futures and options contracts and how each can be used to hedge against investment risk ... Read Answer >>
Hot Definitions
  1. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  2. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  3. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  4. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  5. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  6. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
Trading Center