Bid price… sudden Drop
An option gives you the option rather than the obligation to buy (or sell) the underlying so you don't have to exercise you can just let the option expire (so long it doesn't have an automatic expiry). After expiration the option is worthless if it is out of the money but other than that has no hangover. Option prices normally drop as the time value of the option decays. An option has two values associated with it; time value and exercise value. Far out of the money (when the price of the underlying is far from the strike price on the losing side) options only have time value whereas deep in the money options (as yours seems to be) has some time value as well as the intrinsic value of the right to buy (sell) at a low (high) price and then sell (buy) the underlying.  The time value of the option comes from the possibility that the price of the underlying will move (further) in your favour and make you more money at expiry. As expiry closes it is less likely that there will be a favourable mood so this value declines which can cause prices to move sharply after a period of little to no revaluing. Up to now what I have said applies to both OTC and traded options but exchange traded options have another level of complexity in their trading; because there are fewer traders in the options market the size of trade at which you can move the market is much lower. On the equities markets you may need to trade millions of shares to have be substantial enough to significantly move a price, on the options markets it could be thousands or even hundreds. If these are European style options (which sounds likely) and a single trading entity was holding a large number of the exchange traded options and now thinks that the price will move significantly against them before expiry their sell trade will move the market lower in spite of the options being in the money. Their trade is based on their supposition that by the time they can exercise the option the price will be below the strike and they will lose money. They have cashed out at a price that suited them and limited what they will lose if they are right about the underlying. If I am not correct in my excise style assumption (European) I may need more details on the trade as it seems like you should just exercise now and take the profit if it is that far into the money.
"As I understand it, Implied Volatility represents the expected gyrations of an options contract over it's lifetime.  No, it represents that expected movement of the underlying stock, not the option itself.  Yes, the value of the option will move roughly in the same direction the value of the stock, but that's not what IV is measuring. I even tried staring at the math behind the Options pricing model to see if that could make more sense for me but that didn't help. That formula is correct for the Black-Scholes model - and it is not possible (or at least no one has done it yet) to solve for s to create a closed-form equation for implied volatility.  What most systems do to calculate implied volatility is plug in different values of s (standard deviation) until a value for the option is found that matches the quoted market value ($12.00 in this example).  That's why it's called ""implied"" volatility - the value is implied from market prices, not calculated directly. The thing that sticks out to me is that the ""last"" quoted price of $12 is outside of the bid-ask spread of $9.20 to $10.40, which tells me that the underlying stock has dropped significantly since the last actual trade.   If the Implied Vol is calculated based on the last executed trade, then whatever algorithm they used to solve for a volatility that match that price couldn't find a solution, which then choose to show as a 0% volatility.   In reality, the volatility is somewhere between the two neighbors of 56% and 97%, but with such a short time until expiry, there should be very little chance of the stock dropping below $27.50, and the value of the option should be somewhere around its intrinsic value (strike - stock price) of $9.18." At any given time there are buy orders and there are sell orders.  Typically there is a little bit of space between the lowest sell order and the highest buy order, this is known as the bid/ask spread.  As an example say person A will sell for $10.10 but person B will only buy at $10.00.  If you have a billion shares outstanding just the space between the bid and ask prices represents $100,000,000 of market cap. Now imagine that the CEO is in the news related to some embezzlement investigation.  A number of buyers cancel their orders.  Now the highest buy order is $7.  There isn't money involved, that's just the highest offer to buy at the time; but that's a drop from $10 to $7.  That's a change in market cap of $3,000,000,000.  Some seller thinks the stock will continue to fall, and some buyer thinks the stock has reached a fair enterprise value at $7 billion ($7 per share).  Whether or not the seller lost money depends on where the seller bought the stock.  Maybe they bought when it was an IPO for $1.  Even at $7 they made $6 per share. Value is changing, not money.  Though it would be fun, there's no money bonfire at the NYSE. "In a sense, yes. There's a view in Yahoo Finance that looks like this   For this particular stock, a market order for 3000 shares (not even $4000, this is a reasonably small figure) will move the stock past $1.34, more than a 3% move.  Say, on the Ask side there are 100,000 shares, all with $10 ask. It would take a lot of orders to purchase all these shares, so for a while, the price may stay right at $10, or a bit lower if there are those willing to sell lower.  But, say that side showed $10 1000, $10.25 500, $10.50 1000. Now, the volume is so low that if I decided I wanted shares at any price, my order, a market order will actually drive the market price right up to $10.50 if I buy 2500 shares ""market"".  You see, however, even though I'm a small trader, I drove the price up. But now that the price is $10.50 when I go to sell all 2500 at $10.50, there are no bids to pay that much, so the price the next trade will occur at isn't known yet. There may be bids at $10, with asking (me) at $10.50. No trades will happen until a seller takes the $10 bid or other buyers and sellers come in." "- In a quote driven market, must every investor trade with a market        maker? In other words, two parties that are both not market makers        cannot trade between themselves directly? In a way yes, all trades go through a market maker but those trades can be orders put in place by a ""person"" IE: you, or me. - Does a quote driven market only display the ""best"" bid and ask        prices proposed by the market makers? In other words, only the        highest bid price among all the market makers is displayed, and        other lower bid prices by other market makers are not? Similarly,        only the lowest ask price over all market makers is displayed, and        other higher ask prices by other market makers are not? No, you can see other lower bid and higher ask prices. - In a order-driven market, is it meaningful to talk about ""the current stock price"", which is the price of last transaction? Well that's kind of an opinion. Information is information so it won't be bad to know it. Personally I would say the bid and ask price is more important. However in the real world these prices are changing constantly and quickly so realistically it is easier to keep track of the quote price and most likely the bid/ask spread is small and the quote will fall in between. The less liquid a security is the more important the bid/ask is. -- This goes for all market types. - For a specific asset, will there be several transactions happened at    the same time but with different prices? Today with electronic markets, trades can happen so quickly it's difficult to say. In the US stock market trades happen one at a time but there is no set time limit between each trade. So within 1 second you can have a trade be $50 or $50.04. However it will only go to $50.04 when the lower ask prices have been exhausted.   - Does an order driven market have market makers?  By definition, no. - What are some examples of quote driven and order driven financial markets, in which investors are commonly trading stocks and derivatives, especially in U.S.? Quote driven market: Bond market, Forex. Order driven market: NYSE comes from an order driven market but now would be better classified as a ""hybird market"" Conclusion: If you are asking in order to better understand today's stock markets then these old definitions of Quote market or Order market may not work. The big markets in the real world are neither. (IE: Nasdaq, NYSE...) The NYSE and Nasdaq are better classified as a ""hybird market"" as they use more then a single tactic from both market types to insure market liquidity, and transparency. Markets these days are strongly electronic, fast, and fairly liquid in most cases. Here are some resources to better understand these markets: An Introduction To Securities Markets The NYSE And Nasdaq: How They Work Understanding Order Execution" "At any moment, the price is where the supply (seller) and demand (buyer) intersect. This occurs fast enough you don't see it as anything other than bid/ask. What moves it? News of a new drug, device, sandwich, etc. Earning release, whether above or below expectations, or even dead-on, will often impact the price.  Every night, the talking heads try to explain the day's price moves. When they can't, they often report ""profit taking"" for a market drop, or other similar nonsense. Some moves are simple random change." There are also currency hedged ETFs. These operate similarly to what gengren mentioned. For example, a currency hedged Japan equities ETF has an inherent short yen/usd position on it in addition to the equity position, so the effects of a falling yen are negated. Note that it will still be denominated in dollars, however. AED is pegged to the dollar though, isnt it? If your broker is charging you a crazy price maybe try again a different day, or get a new broker. http://www.ishares.com/us/strategies/hedge-currency-impact If the stock has low liquidity, yes there could be times when there are no buyers or sellers at a specific price, so if you put a limit order to buy or sell at a price with no other corresponding sellers or buyers, then your order may take a while to get executed or it may not be executed at all. You can usually tell if a stock has low liquidity by the small size of the average daily volume, the lack of order depth and the large size of the gap between bids and offers. So if a stock for example has last sale price of $0.50, has a highest bid price of $0.40 and a lowest offer price of $0.60, and an average daily volume of 10000 share, it is likely to be very illiquid. So if you try to buy or sell at around the $0.50 mark it might take you a long time to buy or sell this stock at this price. &gt; we make a trade-off between time to execute and market impact.  Is your time frame any longer than intraday? I imagine you wouldn't want to carry that risk overnight if you're a broker or selling a route..  &gt; we will join the bid for some fraction of our size, and also hit the offer when it looks like the price might be moving away from us  So, say for instance you join a bid a few levels down, you aren't really get filled, you start hitting the offer and eventually you realize you're competing with someone for the shares offered, so you take out the price level and bid on all the exchanges so that you're first on the bid at that level, then repeat until someone that can match your appetite starts to fill you on the bid?  &gt; In some certain situations we will even sweep the book several levels deep to avoid tipping off market makers and having them adjust in anticipation of the rest of our order.  Right, so say you need 100k shares, there are 10k offered at 9.98, 25k offered at 9.99, and 65k at 10.00, you might just enter an intermarket sweep order of 100k @ 10 limit and hope that you can get most of the shares off before everyone can cancel?  I imagine there has to be a lot of bidding it up to attract sellers and then letting people take out your bids all day...  I have a few other questions I would appreciate your insight on. Just trying to ascertain how orders are filled when, as you put it, time is more important than market impact to the client - when they need to take a large amount of liquidity as quickly as possible and as orderly as possible.  Let me know if you'd rather I pm you about this or the additional questions, I work in the industry as well so I know privacy is paramount.