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. Quote

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    A crossed market is a situation arising when the bid price of ...
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RELATED FAQS
  1. Implied Volatility

    Implied volatility is an important concept in option trading. Learn how it is calculated using the Black-Scholes option pricing ... 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. 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 >>
  4. How is implied volatility used in the Black-Scholes formula?

    Learn how implied volatility is used in the Black-Scholes option pricing model, and understand the meaning of the volatility ... Read Answer >>
  5. If the stock market is so volatile, why would I put money into it?

    Learn how the up and down movement of price, known as volatility, can benefit short-term investors and why long-term investors ... Read Answer >>
Hot Definitions
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    A ratio analysis is a quantitative analysis of information contained in a company’s financial statements.
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