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. Entropy

    A mathematical measurement of the degree of uncertainty of a ...
  3. Ask

    The price a seller is willing to accept for a security, also ...
  4. Futures Contract

    A contractual agreement, generally made on the trading floor ...
  5. Bid

    1. An offer made by an investor, a trader or a dealer to buy ...
  6. Volatility

    1. A statistical measure of the dispersion of returns for a given ...
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