What is the price ceiling? - Learn from A to Z
Currently, securities are one of the fields that receive the attention of many people. Therefore, to become a good investor, you first need to master the basics. When participating in investment, the ceiling price is a term that you must understand. So what is the price ceiling ? How is it calculated? Let's answer it right here.
What is the price ceiling?
What is the price ceiling? – Price ceiling is understood as the highest price at which an investor can place an order to buy or sell securities during the trading day. Therefore, investors cannot buy higher than the ceiling price listed on the exchange.
Investors can only place orders to buy or sell securities limited to the ceiling price offered. If set outside the ceiling price, the system will report an error and the investor will not be able to place the order.
What Is The Price Ceiling?
Each exchange will offer different ceiling prices for securities. At the same time, each type of stock will have a separate ceiling price. When setting a price ceiling, the government's goal is to control prices to protect consumers. Depending on the market, the ceiling price will have different meanings.
The current ceiling price is specifically listed on the stock exchanges UPCOM, HOSE as well as HNX and so that investors can place buy or sell orders for securities right on the trading day.
Maybe a lot of investors wonder what the ceiling price means? In essence, the ceiling price of securities is set to avoid manipulation. Or push the stock price of investors too high. As well as selling too low price in 1 trading session.
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What is the formula for calculating the ceiling price?
Surely every investor when starting out will wonder "What is the formula for calculating the ceiling price?". Currently, the ceiling price of securities will be calculated based on the reference price. As well as the amplitude of fluctuations of the floors. The specific calculation method will be specified as follows:
Ceiling price = Reference price * (1 + Range)
Inside:
- The reference price is the closing price of the previous trading day (execution price of the last matched order). Each exchange will have a different way of calculating the reference price.
- Range is known as the percentage of a stock's price that can fall or rise during a trading session. Each trading floor will have its own regulations on the fluctuation range.
What is the formula for calculating the ceiling price?
To better understand how to calculate the current ceiling price of securities, you can refer to the following specific examples:
On the HNX, a stock ticker H is currently listed at a reference price of 22.5 (that is, equivalent to VND 22,500 per share) and has a fluctuation range of 10%. Then the ceiling price of stock H will be calculated as follows: (10% * 22.5) + 22.5 = 24.75.
Thus, securities investors were only allowed to place trading orders with a price range of up to VND 24,750 per share. At the same time, it is mandatory not to place sell orders or buy orders beyond this price.
Regulations on ceiling prices of securities
On the stock price lists listed on the exchanges, the prices are specified by colors to help investors easily distinguish. The ceiling price of securities according to the regulations of HOSE and HNX will be listed in purple.
On the stock price list at different exchanges, the price is specified by color. To help investors can easily distinguish. In which, the ceiling price of securities is specified in purple. Besides, investors need to know that ceiling prices are also distinguished through symbols. The ceiling price has the symbol CE (short for the word Ceiling).
Price ceiling is specified as purple
Especially in securities, the price ceiling applies the rounding rule. To solve the problem, when the reference price multiplied by the fluctuation range, the number will be odd. With regulations like these, it will help investors easily distinguish as well as learn more about those securities.
Therefore, the Securities Exchange Commission has rules for rounding the ceiling price of securities as follows:
Round the ceiling price down according to the specified price step. Price < 50,000 steps the price is 100 VND; price < 100,000 steps the price is 500 VND; price > 100,000 steps the price is 1,000 VND.
For example: After taking ceiling price * 1.05 or ceiling price * 0.95 if the result is 50.999 then round to 50,500.
It can be seen that the ceiling price is an important indicator shown on the stock exchange. It helps investors make orders to buy and sell securities accordingly. Thereby eliminating possible risks. Hope you have more useful information in trading.
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