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

    A quote refers to a price determined at a specific instance of ...
  2. Quoted Price

    A quoted price is the most recent price at which an investment ...
  3. Volatility Arbitrage

    Volatility arbitrage is a trading strategy that attempts to profit ...
  4. Volatility Swap

    A forward contract whose underlying is the volatility of a given ...
  5. Level 3

    A trading service consisting of everything in Level 2, plus the ...
  6. Stock Quote

    A stock quote is the price of a stock as quoted on an exchange. ...
Related Articles
  1. Trading

    Option Price-Volatility Relationship: Avoiding Negative Surprises

    Learn about the price-volatility dynamic and its dual effect on option positions.
  2. Trading

    Options: Implied Volatility and Calendar Spread

    Even if risk curves on a calendar spread look enticing, a trader needs to assess implied volatility.
  3. Trading

    Ratio Writing: A High-Volatility Options Strategy

    Selling a greater number of options than you buy profits from a decline back to average levels of implied volatility.
  4. Investing

    How to Take Advantage of Volatility as an Investor

    Everyone talks about the downside of volatility, but it has its benefits too, including opportunities to investment entry points at lower prices.
  5. Investing

    Roller coaster 2016 for Stocks? Exploring Global Stock Volatility

    Find out how much volatility global equity investors are in for during 2016 by seeing how much they've experienced over the past five years.
  6. Trading

    Option Volatility

    Knowing how the market works in relation to volatility can open a whole new world of opportunity.
  7. Investing

    A Quick Guide for Futures Quotes

    Here is a quick guide for reading and understanding futures markets quotes.
  8. Trading

    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. What do the numbers after the bid and ask numbers in stock quotes mean?

    These numbers are called the bid and ask sizes, and they represent the aggregate number of pending trades at the given bid ... Read Answer >>
  3. What is the difference between a quote driven market and an order driven one?

    The difference between these two market systems lies in what is displayed in the market in terms of orders and bid and ask ... Read Answer >>
  4. What is the best measure of a stock's volatility?

    Understand what metrics are most commonly used to assess a security's volatility compared to its own price history and that ... Read Answer >>
Hot Definitions
  1. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
  2. Limit Order

    An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
  3. Current Ratio

    The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations.
  4. Return on Investment (ROI)

    Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency ...
  5. Interest Coverage Ratio

    The interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a company can pay interest ...
  6. Cash Conversion Cycle - CCC

    Cash conversion cycle (CCC) is a metric that expresses the length of time, in days, that it takes for a company to convert ...
Trading Center