When you buy shares of stock at different prices, you'll want to know what the average price, or cost, of your position is to help you determine whether the stock is a profitable investment. For example, you may buy shares of a stock for $4 one month and more shares of the same stock for $3 the next month. The average price of your position equals the total purchase price divided by the total number of shares purchased. The higher the stock's price rises above the average price of your position, the more profit you will make.
1. Determine the number of shares of a stock you purchased at different prices and their purchase prices. For example, assume you bought 100 shares of a stock at $10 per share, 200 shares at $7 per share and 250 shares at $8.50.
2. Multiply each number of shares by their purchase price. In this example, multiply 100 by $10 to get $1,000, multiply 200 by $7 to get $1,400, and multiply 250 by $8.50 to get $2,125.
3. Add the amount of each purchase to calculate the total purchase price of the stock. In this example, calculate the sum of $1,000, $1,400 and $2,125 to get a total purchase price of $4,525.
4. Calculate the sum of the number of shares you bought to determine the total number of shares you bought. In this example, calculate the sum of 100, 200 and 250 to get 550 total shares.
5. Divide the total purchase price by the total number of shares to calculate the average price of the position. In this example, divide $4,525 by 550 to get an average price of $8.23.
- Recalculate the average price of your position each time you add to or reduce the size of your position in a stock.
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