Average price calculation

Q&A
1

Hi Evan,

I would like to clarify about the average price calculation
Day 1 : bought 5000 shares @ 0.945
Day 2 : bought 5500 shares @ 0.925
Day 3 : bought 10000 shares @ 0.94
Day 3 : same day sell 10000 shares @ 0.92

by right , the average price should be ( (50000.945) + (55000.925) ) / ( 5000+5500 )
which is 0.9345

but right now it was calculated as 0.744 … i would like to know how it’s being derived.

Please let me know if you need the actual stock name : the transactions was for SGX:JYEU and for my id : haditeo

Thank you

Hadi

2

Hi Hadi,

It is because StocksCafe is using averaging and not LIFO methodology in computing average price -> Calculation method for CLOSED

Also, for Day 3, I checked, your buy price was 0.54 instead of 0.94. Likewise the sell price was 0.52 instead of 0.92.

Day 1: Bought 5000 shares @ 0.945 => Total Shares 5K, Total Cost = 4725, Price per share = 0.945
Day 2: Bought 5000 shares @ 0.925 => Total Shares 10K, Total Cost = 9350, Price per share = 0.935
Day 3: Bought 10000 shares @ 0.54 => Total Shares 20K, Total Cost = 14750, Price per share = 0.7375

When you sell at Day 3, it does not affect the average price. so, average price is 0.7375 ~= 0.744 (StocksCafe actually also factor in fees which we skipped here for simplicity).

Cheers,
Evan

3

Thank you Evan

1 Like
4

sorry, but how to derive 0.7375 ?

Let’s say :
at end of Day 3 : i sold 10000 shares @0.52 =>

Day 4 : bought 10000 shares @ 0.51
Day 5 : sold 10000 shares @0.53 , so at this point how many shares do i have ? , total cost ?

does it mean that if i keep buy and sell the same total number of stocks, then will it average down ?

Thank you

5

Day 1: Bought 5000 shares @ 0.945 => Total Shares = 5K, Total Cost = 4725, Price per share = 0.945
Day 2: Bought 5000 shares @ 0.925 => Total Shares = 10K, Total Cost = 9350, Price per share = 0.935
Day 3: Bought 10000 shares @ 0.54 => Total Shares = 20K, Total Cost = 14750, Price per share = 0.7375

At end of Day 3 : i sold 10000 shares @ 0.52 => Total Shares = 10K, Total Cost = 7375 (i.e. 0.7375 x 10K), Price per share = 0.7375 (Price per share is not supposed to change when selling)

Day 4 : bought 10000 shares @ 0.51 => Total Shares = 20K, Total Cost = 7375 + 5100 (i.e. 0.51 x 10K) = 12375, Price per share = 12375 / 20K = 0.61875 (Here, you average down because the 0.51 < 0.7375)

Day 5 : sold 10000 shares @0.53 => Total Shares = 10K, Total Cost = 6187.5 (i.e. 0.61875 x 10K), Price per share = 6187.5 (Price per share is not supposed to change when selling)

6

Hi Evan,
So the average share price is only affected when one buys but the average price stays the same when one sells regardless of the sale price.
This means a profit or loss on sale does not affect the average share price shown. Is that correct.

Kevin

7

Hi Kevin,

Yes, that is correct.