Price band
Also called: daily price band, circuit limit, circuit filter
Either the most a share's price may move in a day, set by the exchange, or the range of prices for bids in a book-built IPO.
In trading, a daily price band limits how far a share's price can move up or down from the previous close in one day, for example 5% either way. When the price reaches the limit, traders say the share has hit its upper or lower circuit. Exchanges set the band for each share and change it from time to time; shares with futures and options are treated differently.
In an IPO, a company using book building announces a price band before the issue opens. Investors bid at prices within it, often choosing the "cut-off" option to accept whatever final price is set. The band is set by the company and its bankers; it is not an independent judgement of what the shares are worth.
Example
A share that closed at ₹200 with a 5% band can trade only between ₹190 and ₹210 today.
Learn more in these lessons
- IPO basicsWhat is an IPO and how do you apply for one?
- Circuit breakers and price bandsWhat is a circuit breaker in the stock market?
- Reading a stock quoteWhat do the numbers on a stock quote mean?
Related terms
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