Volatility Quotient

The Volatility Quotient, also known as the VQ%, tells you the risk measurement of a security. It tells investors how volatile a stock is, how much room you can give a stock to not get stopped out too early, and how much uncertainty or noise there is in your stocks. It is a rate at which the price of a security increases or decreases for a given set of returns. Used in option pricing formula to gauge the fluctuation, the VQ% is measured by calculating the standard deviation of the annualized returns over a given period of time. The lower the VQ, the more stable the movement of that stock. Higher VQ percentages indicate the stock has historically been more volatile in its market moves over time.

  • Measure of historical volatility over 12-18 months
  • Tells you how much volatility you need to be comfortable with in order to hold the stock over a long period
  • Used to set a stop loss level
  • Created by Dr. Richard Smith from Tradesmit