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Quoted Price

Updated on May 29, 2024
Article byWallstreetmojo Team
Edited byAaron Crowe
Reviewed byDheeraj Vaidya, CFA, FRM

Quoted Price Meaning

A quoted price refers to the latest trading (bid and ask) value agreed upon by traders for security. It usually appears as a notification on the online trading platforms, signifying prices of in-demand stocks, bonds, derivatives, or commodities. Exchanges express it in cents or dollars.

The quoted or market price also shows the highest and lowest selling prices for a particular asset. This value fluctuates throughout the day, depending on order volume and other factors affecting financial markets and investment valuations. It gives new traders an understanding of the security’s demand, supply, and performance, allowing them to make a profitable investment.

Key Takeaways

  • A quoted price is the most recent bid and ask value in cents or dollars for security agreed upon by traders. This information constantly changes based on trading activity in a day.
  • It helps inexperienced traders understand the demand, supply, and performance of stocks, bonds, derivatives, or commodities, allowing them to make profitable trades.
  • Quoted or market prices show on an electronic ticker tape on a stock exchange or as a notification on online trading platforms or apps.
  • Components of a quotation price include level 1, 2, and 3 prices, bid and ask prices, highest and lowest prices, quote size, bid-ask spread, order volume, and market makers.

How Quoted Price Work?

A quoted price reflects the last traded value of a security, and it keeps changing depending on the trading activity throughout a day. However, it does not tell anything about market makers. It usually appears on an electronic ticker tape on the trading floor of a stock exchange. The ticker tape also displays information, such as the stock symbol, trading volume and value, fluctuation in the last quoted value, and degree of price change.

Quoted Price

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When a security is sold, its supply increases, causing a decline in the market price and vice versa. Thus, it helps a trader understand the market performance. Traders and financial analysts constantly observe and use the quoted price to make informed investment decisions. Also, it helps them understand market liquidity, make accurate market predictions, and execute profitable trade. The bid-ask spread determines the liquidity of a security.

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Quoted Price Components

A trader can know many things from the quoted price of a security. They can obtain these quotations online from stock exchanges or other financial resources.

Quote Price Components

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#1 – Level 1 Price

It provides a security’s bid (buy) and ask (offer/sell) prices in a trading session in real-time. However, it does not reveal market makers or potential trading volume and value.

#2 – Level 2 Price

It provides more in-depth trading information in real-time, such as bid and offer prices, market makers, quotation size, the latest trading price and volume, and the highest and lowest prices in a day.

#3 – Level 3 Price

It is a combination of 1st and 2nd, allowing the market maker to adjust bid and ask prices, quotes, order sizes, and execute orders for security.

#4 – Bid and Ask Prices

The bid and ask prices are the essential components of a quoted or market price. The former is the maximum sum an investor offers to buy securities. On the other hand, the latter is the amount of money a trader is willing to accept for an asset. The ask price is usually more than the bid price, while the latter is higher than the quotation price.

#5 – Bid-Ask Spread

The difference between ask and bid prices is known as the bid-ask spread. It serves as a liquidity indicator for an asset, allowing traders to trade at a profit. Assets with a smaller gap denote a high liquidity and trading volume and can be easily bought and sold. When the spread is wide, it signifies low market liquidity and trading volume. The security is then unlikely to be bought and sold in large volumes. For example:

  • Narrow spread = Very liquid investment, high trading volume
  • Wide spread = Less liquid investment, low trading volume
Bid-Ask Spread

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The larger the spread, the more difficult it would be to trade the particular security. It happens because the offer made by the seller is much higher than what the buyer would want to pay. Therefore, both would be less willing to trade because that will result in a loss on either side. The loss occurring due to the difference in the bid-ask spread is called slippage.

As soon as a trade ends, bid and ask prices change and usually increase, depending on the demand on a trading day. Thus, the last price of a security represents its current quoted price.

Quoted Price Of Bond

A bond’s quotation price is a little more complicated than other securities. In this case, the quoted price formula depicts the bond quote as a percentage of its par value. The resultant figure is then converted into a point sale, which finally becomes the quotation price of the bond. The par value, usually fixed at 100, symbolizes the bond’s overall worth. It can be expressed as a number more or less than 100.

For instance, if a bond’s quoted price par value is 95, it means that the firm offered trading at 95% of the bond’s actual value. So, if the real value is $1,000, it means the bond is selling at $950. An investor will buy the security worth $1,000 at $950, making a $50 profit.

Since bonds trade in the bond market, they have bid and ask prices like any other asset. The bid is the actual price of the bond for instant trading. Quoted bond prices can also vary with yields on maturity, which helps investors learn more about the trading trend.

Quoted Price Of Stock

The stock quotation price includes the latest bid and ask prices, last traded price, and volume. Sometimes it provides information about price fluctuations during a specific period. There can also be recommendations for better trades, depending on the exchange.

Stock quotation price also includes other details, such as closing and opening prices. With lots of information to work with, investors now have more options to trade specific equities.

With the advancement of technology, it has been much easier for investors to obtain quoted stock prices without visiting a stock market. For instance, some applications provide up-to-date prices at the touch of a button. In addition, many websites offer this information, either free of cost or for a fee. It makes it easier to determine the risk of a particular stock trading and its trajectory. It then makes it possible to make an informed decision on whether to buy the stock. Such valuable updates also increase investors’ faith in a company and buy more.

Stock quote prices were marked as fractions in the United States until April 2001, when they switched to decimal systems. The spread level has decreased dramatically as a result of this. It enabled investors to make more money by lowering transaction costs.

Frequently Asked Questions (FAQs)

What is quoted price?

The quoted price is the latest trading price in cents or dollars for a security or asset agreed upon by traders. It consists of bid price and ask prices, highest and lowest prices, quote size, and bid-ask spread. This information helps the trader understand the demand, supply, and performance of a security in the market.

How to calculate the quoted price of a bond?

A bond’s value can be calculated using the quoted price formula. It is simple to compute by multiplying the bond’s par value by its quote in percentage. For example, a bond with a market price of 120 and a par value of $1,000 will have a bond value of $1,200.

Where can you find the quoted price of a stock?

Many online trading platforms, financial websites, and mobile apps provide recent stock quote prices. Some of them even let the user access these data free of charge. Analyzing the stock market price gives the trader an advantage in making a profitable trade.

This has been a guide to Quoted Price and its Meaning. Here we discuss quoted price of bonds and stock and how it works along with components. You can learn more from the following articles –