What is prices volatility?
Price volatility concerns the tendency of asset to rise and decrease in the price for a certain period of time. Volatility depends on the range between high and low price assets and the number of changes in the price it is subject to. The more volatility of the price has asset, the more risky it is like a potential investment. On the other hand, some investors prefer to find assets with significant volatility because these assets represent the best opportunities for large profits in a small period of time. In fact, however, people deal with volatility every day. For example, gas prices are rising and falling depending on oil costs and food prices can move significantly if the production of the critical component is interrupted. There are many other examples of price volatility, which measure how many changes in the price of assets that affect the overall financial climate.
It is important to realize that the volatility of asset prices is measured independently of the price level. Imagine a napRating that it supplies trading for $ 10 in USD (USD) per share and remains seven consecutive days at this level. Meanwhile, in the same period of time, shares B starts at $ 20 per share, increases to $ 40 per share, drops to $ 10 per share, and then returns to $ 20 per share. Although shares and cheaper shares, it has much less volatility and is more stable than more expensive supplies b.
The amount of volatility that the investor is willing to endure can depend on the goals he has for his capital. In general, extreme volatility for investors is a bad thing because it is not possible to predict what the price of the asset will be from one day to the next. This means that any capital that is invested in a particularly volatile asset is a great risk.
However, there are times when investors can prefer stocks or other assets with great price volatility than those who have greater stability. For example, daily traders specializing in the production of many stores in a short period of time, often PThey eat volatile supplies, try to buy them at their low points and sell them at their highest points to make profits. The holder of the possibilities or futures could also prefer volatile shares, as contractual bonuses are already paid and volatility of the asset that is the basis of the contract can actually help make it profitable.