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Information > Financial Terms > This page Trading Value Among
traders or speculators, the price at which a purchase, whether a bond,
stock, real estate, or commodity, must be sold in order for the owner
to get out even; in the language of speculation, the price at which a
purchase stands the owner, e.g., if a stock has been purchased at 90,
it must be sold at that price if the owner is to avoid taking a loss.
The trading value at the time of actual purchase is equal to the
cost, market and book values. Where
trading operations are constantly engaged in, a record of trading values
is extremely important, because these values are the indicators of the
profitableness of individual transactions.
To illustrate the use of trading value, suppose ten bonds having
a par value of $1,000 each are bought for $9,000.
The trading value is 90 (100 equals par); that is, ten bonds would
have to be sold at 90 in order to avoid a loss.
If, however, five of these bonds are sold for $5,000, the trading
value for the remaining five is 80 because they may be sold at that price
without this particular block of bonds being closed out at a loss.
Bond and stock traders apply the profit made in one group of securities
to losses made in others to determine net results and for tax purposes. |