Volatility Quote Trading

DEFINITION of 'Volatility Quote Trading'

A method of quoting option contracts whereby bids and asks are quoted according to their implied volatilities rather than prices.

BREAKING DOWN 'Volatility Quote Trading'

Used mainly by sophisticated investors, volatility quotes benefit those investors who trade upon volatility rather than price. These investors are typically interested in the likelihood of a contract moving up or down in price rather than in its actual cost.

RELATED TERMS
  1. Implied Volatility - IV

    The estimated volatility of a security's price.
  2. Volatility Arbitrage

    Trading strategies that attempt to exploit differences between ...
  3. Firm Quote

    A price quote on a security, made by a dealer or market maker, ...
  4. Handle

    The whole number part of a price quote. In a quote the handle ...
  5. Stock Quote

    The price of a stock as quoted on an exchange. A basic quote ...
  6. Contract For Differences - CFD

    An arrangement made in a futures contract whereby differences ...
Related Articles
  1. Options & Futures

    Implied Volatility: Buy Low And Sell High

    This value is an essential ingredient in the option pricing recipe.
  2. Options & Futures

    Option Price-Volatility Relationship: Avoiding Negative Surprises

    Learn about the price-volatility dynamic and its dual effect on option positions.
  3. Investing

    3 Reasons to Ignore Market Volatility (VIX)

    If you can keep your head while those about you are losing theirs, you can make a nice return in roiling markets.
  4. Investing

    Tips For Investors In Volatile Markets

    Find out what to look out for when trading during market instability.
  5. Investing

    Volatile Stocks: Great, If You Have The Stomach

    Volatile stocks can be a lucrative opportunity for short-term traders. For buy-and-hold investors, it's a much different story.
  6. Stock Analysis

    Options 101: At the Money

    Options contracts give the holder the right to buy or sell an underlying security at a predetermined strike price for a limited amount of time. If the underlying security is trading at the same ...
  7. Options & Futures

    Options Volatility: Valuation

    By John Summa, CTA, PhD, Founder of OptionsNerd.comAs we've already learned, volatility comes in two forms: statistical (historical volatility) and implied (IV). We saw how past levels of IV ...
  8. Forex Education

    Forex Tutorial: Reading a Forex Quote and Understanding the Jargon

    One of the biggest sources of confusion for those new to the currency market is the standard for quoting currencies. In this section, we'll go over currency quotations and how they work in ...
  9. Stock Analysis

    Options Traders: Watch Out For This Little-Known Income Killer

    Using a covered call strategy can be a great way to generate steady returns in your portfolio. As a general rule, I expect my covered call trades to increase my capital by about 25% to 35% per ...
  10. Options & Futures

    How To Profit From Volatility

    We explain four key strategies to profit fom volatility in markets.
RELATED FAQS
  1. What is the relationship between implied volatility and the volatility skew?

    Learn what the relationship is between implied volatility and the volatility skew, and see how implied volatility impacts ... Read Answer >>
  2. 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 >>
  3. 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 >>
  4. Why are the bid prices of T-bills higher than the ask prices? Aren't bids supposed ...

    Yes, you are correct that the ask price of a security should typically be higher than the bid price. This is because people ... Read Answer >>
  5. What do the bid and ask prices represent on a stock quote?

    Learn what the bid and ask prices mean in a stock quote. Find out what represents supply and demand in the stock market and ... 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. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  2. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  3. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  4. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  5. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  6. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
Trading Center