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What is an Autoquote?

By A. Leverkuhn
Updated Jan 31, 2024
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An autoquote is a kind of current pricing model for options contracts, which are somewhat standard investment opportunities for traders through various exchange markets. Those who are not very familiar with financial markets and investment tools should not confuse the financial options autoquote with an “auto quote,” which is a quoted price for a vehicle or for vehicle financing. The option auto-quote is basically an estimated value for a contract on the future price of a stock or equity.

The methods that the autoquote estimate system uses, include the Black and Scholes method for valuing options. Finance experts explain that an autoquote is based on “real-time variables” for a stock price and other measurements of a company’s worth or value. By factoring in many different current values, an autoquote can provide a reasonable worth for an option contract.

Some finance experts define autoquotes as price estimates for options traded on the London International Financial Futures and Options Exchange or LIFFE. This exchange is a shareholder-owned market that deals in various derivatives. The autoquote model may be expanded to options contracts on other exchanges.

For beginners who want to know how autoquotes reflect values for options contracts, it’s important to understand how options contracts work. The most simple way to define an options contract is that it is an agreement between two parties on gains related to the future worth of a stock or equity. One party “borrows” shares from another, agreeing to an eventual future transaction caused by the option holder “exercising” the option. The share lender agrees to buy back the shares if the options holder decides to exercise. This will result in gain or loss according to how the stock price has changed.

The two most basic kinds of options contracts are called a “call” and a “put.” A call is based on desired gains through projected rises in stock prices. The put is the reverse: it is based on desired gains from projected decreases in a stock price.

Many options traders do not need to understand autoquote models in order to trade options contracts. The autoquote system simply explains the valuation of options. These options are priced by exchanges, and investors can always find current menus of options prices through public financial resources online. An investor does not have a role in valuing options; he or she instead chooses when and how to invest in them through a legitimate broker or brokerage firm.

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