What does volatility indicate in trading?

Volatility in trading specifically refers to the degree of variation in a security's trading prices over time. High volatility indicates that a stock's price can change dramatically in a short period, reflecting greater uncertainty among investors and often resulting from factors such as market sentiment, economic news, and changes in the underlying company’s fundamentals. Traders and investors closely monitor volatility because it impacts risk; a more volatile stock has the potential for higher returns but also increases the likelihood of significant price swings.

The other choices do not accurately capture the concept of volatility. The total value of a company's stock pertains to market capitalization rather than price fluctuations. Stability in a stock's price contradicts the notion of volatility, as volatility inherently involves movement and variation, not steadiness. Lastly, while profitability is an important aspect of investments, it does not inherently relate to price variations and does not define what volatility is within the context of trading.