Unchanged

The term “Unchanged definition” is generally used among fixed Income, futures markets, options, and equities. Additionally, the term is also applicable to Exchange-Traded Funds (ETFs), indexes, and the Net Asset Value (NAV) of Mutual Funds.

Understanding “UNCH”

In the stock world, the term “unchanged” refers to the closing quote that a particular stock has at the end of a trading day is the same as the stock’s closing price on the previous day.

In simple words, the term means that a stock price is not having much movement; however, this assumption can be dangerous at times.

For example, say company ABC closes at INR 45 per share on Monday. On Tuesday, let’s assume that some stocks of company ABC are trading at INR 45.50 and others at INR 44. Yet a few others may trade at INR 45.25, and at the end of the day, some are trading at INR 45.

It’s true that the day closes at INR 45 per share on the next day, that’s Tuesday, and therefore, we can say that the stock price of company ABC remains unchanged.

However, it can be a risky assumption that the stock price is unchanged for a particular company. Because a company’s stocks can trade at various prices throughout the day, and therefore, the price is quite volatile in a specific time frame.

Besides, the closing quote of a stock for a day doesn’t necessarily imply that it’s the end of all trading done for the day in a security. Rather it simply indicates that the exchange floor has come to an end.

Additionally, some after-hour markets do keep operating, especially those exchanges in various other countries located across different time zones. These factors add to the Volatility of stock prices and cause them to change over the day.

Why is Unchanged Important?

Although most stock prices tend to go up or down on a given trading day, the day-end price of some stocks will remain unchanged. One reason for this might be sheer luck, while in another case, it might be an indication that you might be dealing with thinly traded stocks.

Let’s look at some of the popular stocks, like Apple, which generally trades millions of shares every day. However, other companies may not trade even a single share in the entire day. Hence, stocks that don’t trade many shares will naturally remain unchanged for the day. Such a stock is known as a thinly traded stock.

However, that doesn’t mean that a thinly traded stock is bad. But these are the stocks that are generally the most volatile. Now, you might think how a stock that doesn’t trade at all can be volatile!

The truth is a stock that remains unchanged for the day after trading little to no shares may tend to be up or down by a significant percentage the next day. And yet the day after, the stock may not trade at all, and hence would finish unchanged.

Another risk associated with thinly traded stocks is a generally large bid-ask spread, which refers to the combination of the maximum price a buyer would pay (that’s the Bid Price) and the minimum price that a seller would be able to sell (that’s the ask price).

That means that a large bid-ask spread would represent a certain profit margin for the Market maker or the specialist, who is managing the actual stock trading.