Quotation – What is a Quote?
The value of shares on the stock market constantly changes as investors buy and sell various equities in real time. A quote for a common share or preferred share is only good for a brief moment in time if the shares are being traded on the open market; likewise, for the bond market, where quotes for bonds are given and valid for a short duration until outside influences cause the value of the bond to change in value. Mutual funds often provide quotes for a unit of their funds based on the day’s trading activity. Mutual funds can have a variety of investments in shares, bonds, and even other mutual funds. Similarly, ETFs trade in all of these investments.
This post will explore in more detail quotes, templates used for quotations, and understanding what these quotes mean in this post.
What Is a Quote?
Simply, a quote is a price you can purchase an asset at a specific moment in time. Quotes for assets such as equities, bonds, ETFs, mutual funds, and other investment vehicles change throughout the day as new transactions are completed. Values changed based on investor sentiment and external information received by the market.
When you receive a stock quote for an investment for a given company, it usually represents the most recent price completed for that equity. There are three main types of quotes. In addition to the stock quotes, there are the bid quote and the ask quote. These quotes reflect the price the stock can be purchased or sold. The stock quote only shows the most recent price the stock sold for.
Many investors review historical quotes to understand trends in the equity based on recent market activity and volatility, which is often driven by company announcements. These announcements can include quarterly financial results, major sales, and perceived difficulties the company may be facing.
Many investors examine trends over time to establish potential trajectories for equities. They may examine completed trades over the day, week, month, or even over a year to assess trends in the value of the equity.
Investors use this information to make decisions regarding whether to establish an ask quote or a bid quote. Someone contemplating purchasing equities will examine the past week’s trades to help determine a bid quote. If they believe the equity is going to decline, they may place a bid quote lower than the current stock quote in hopes the equity will decline throughout the day or week. Similarly, investors planning to sell equities will establish their ask quote based on the direction they see the equity heading over the day or week.
Who Provides Quotes
Quote, information can be obtained from various platforms. Many are delayed by 15 to 20 minutes, especially if the information is provided by free outlets. Information can be obtained from:
- Investment news sites
- Online investment sites
- Smartphone apps
- Bank investment systems
Paid subscribers may enjoy the information provided to them in real-time or very close to real-time, which enhances their trading decisions.
Many investors use sophisticated online apps and investing platforms to track real-time stock quotes and issuing alerts to keep them aware of changes in equity values. These same systems can be programmed to make trades based on these real-time stock quotes. For example, an investor wishing to purchase equities at a specific price can enter this value, and the trade will be executed if the equity reaches this value.
What Is a Quote Template?
A quote template for equities is used to communicate information about the current value of equities. The information changes rapidly, especially if the equity is going through a volatile period. The information is based on the most recent stock quote from the market. There will be a disclaimer on the quote indicating that the information is timely and will change as markets move up or down. The quote template will also indicate any fees associated with the trade if the investor decides to proceed with the equity trade.
Quote templates can also be used for many other activities not associated with trading equities. Quotes are provided for the purchase of various goods and services. Templates are customized for the company and the products and services offered to clients. They include:
- Company name and address
- Current date and expiry date
- Products or services
- Detailed descriptions, if needed
- Total value
- Taxes that may need to be included
- Total value
- Associated warranties
- Custom information based on the company, customer, products, and services.
Understanding the Quotes
There are many terms associated with quotes that require definition and explanation to assist investors in understanding the information they are reviewing:
- Quote – or stock quote is the most recent price that trade was completed for a particular equity
- Bid quote – represents the equity price an investor is willing to pay for a particular equity
- Ask quote – represents the equity price an investor is willing to accept an offer to purchase the equity
- Quoted price – the quoted price is the latest price an equity has traded. The quoted price will change throughout the day. A volatile stock or equity will change in price over minutes and hours.
- Two-way quote – offers the current bid price and the current ask price for equities. In addition to the current equity quote, this information helps investors understand the spread between the bid and ask values.
- Real-time quote–day traders and high-frequency traders rely on real-time information to make trade decisions regarding various equities. A real-time quote shows the trade values at the moment the trade takes place without the standard fifteen-minute delay.
- Market versus quote – compares the last price the equity traded at with current bid and ask prices. High-volume equities will have an MVQ value close to current bid-ask prices, while equities that do not trade often may have a larger MVQ.
- Level III quotes – are pricing information about equities provided by an information service. The real-time bid price, the asking price, the number of shares, the price of the most recent trade, the size of the most recent trade, the highest price for the day, and the lowest price for the day.
Equity and bond markets are volatile, with millions of trades occurring every moment of the day during regular trading hours and after hours as well. Understanding the various types of quotes and information available to investors can assist them in making intelligent decisions regarding the purchase or selling of equities – stocks, bonds, mutual funds, ETFs, etc.
Several important facts to consider are:
- A quote is the most recent value an asset was traded where the buyer and seller agreed to a price and quantity of the asset.
- The bid quote is the most recent price a buyer is willing to purchase the asset.
- The ask quote is the most recent price a purchaser is willing to pay for an asset.
- Investors observe historical prices to determine if the equity is following a particular trend. This may be over a day, week, month, or year depending on the investor’s investment timeframe.
- Quotes are provided by many outlets, usually with a 10 or 15-minute delay. Subscription services may provide real-time quotes.