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Finance GlossaryVolume Weighted Average Price (VWAP)
Volume Weighted Average Price (VWAP)
Definition of Volume Weighted Average Price (VWAP)
VWAP is a trading benchmark that calculates the average price of a security weighted by trading volume throughout the day. Institutional traders often compare execution prices to VWAP; buying below VWAP suggests efficient trade execution, while prices above it may indicate higher-than-average transaction costs.
Related Terms
Illiquid Asset
An illiquid asset is something of value that can not be exchanged for cash easily. Although an illiquid asset may have value, you will not be able to find buyers for it readily. As a result, illiquid assets are typically sold at a significant discount or worse, lose value and expire.
Circuit Breaker
A circuit breaker or market curb is a measure that exchanges use to put a stop to all trading activities across an index or entire market. This regulatory measure is put in place to curb panic selling, especially when markets are in free fall.
That’s why circuit breakers are also known as trading curbs and are put in place when an index or market reaches a specific level. These are the current circuit breaker limits on NSE:
That’s why circuit breakers are also known as trading curbs and are put in place when an index or market reaches a specific level. These are the current circuit breaker limits on NSE:
| Circuit Breaker Trigger | Trading Halt Duration |
|---|---|
| 10% | 0-45 minutes |
| 15% | 45 minutes; 1 hour 45 minutes; rest of the day |
| 20% | Rest of the day |
Dividend Per Share
Dividend per share indicates the amount of dividends paid as a ratio of the number of shares outstanding. Or, dividend per share could also refer to the product of earnings per share and dividend payout ratio.
Thus, the formula to calculate dividend per share is:
DPS: Total dividend amount / Number of shares outstanding
Or
DPS: Earnings Per Share x Dividend Payout Ratio
An investor can determine how much dividends they stand to earn for each share they own by calculating dividends per share.
Thus, the formula to calculate dividend per share is:
DPS: Total dividend amount / Number of shares outstanding
Or
DPS: Earnings Per Share x Dividend Payout Ratio
An investor can determine how much dividends they stand to earn for each share they own by calculating dividends per share.
Runaway Gap
A runway gap or a continuation gap sometimes appears in the middle of a strong price trend. It reflects that the stock price is gaining sustained momentum. Often, these gaps show up when traders rush in. As a result, the prices can move sharply higher or lower. A runaway gap sends a strong signal to those who follow trends. It confirms the strength in price and suggests that the healthy momentum may continue for some time.
Target Price
The target price refers to the projected price level that analysts expect a stock to reach within a predefined time frame. This estimate is based on financial analysis, market trends, and the performance of the company. The target price is often used as a benchmark by investors as they make decisions related to buying, holding, or selling. However, the actual prices may vary as a result of market fluctuations.
Naked Option
Naked Option refers to an options position where the seller does not hold the underlying asset or a hedging position. This exposes the trader to potentially unlimited losses if the market moves sharply against the position. Naked options are generally considered high risk and are used by experienced traders only.
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