2 lots of the same shares at different prices

[jono1887]

Mate, you can't use that formula to work out your average price. We'll try again.

150 @ $1.10 = $165
50 @ $0.70 = $35
=150 + 50 = 200
= $165 + $35 = $200
= 200 shares for a cost of $200 - agreed?

This is what you are doing:
$1.10 + $0.70 = $1.80 / 2 = $0.90
But this is incorrect because - $0.90 x 200 = $180 but the shares have cost you $200. If you work out your ave price like this you will falsify your results.

To get your average price you divide the total cost by the total number of shares not the sum of the purchase prices divided by the number of parcels brought.

If you read my initial post, it says - averaging the price only works if the no. of shares bought each time is the same. My statement is correct.

I am not disputing the fact that if you have purchased different number of shares that your method is correct.

 

[nomore4s]

If you read my initial post, it says - averaging the price only works if the no. of shares bought each time is the same. My statement is correct.

I am not disputing the fact that if you have purchased different number of shares that your method is correct.

But why would you ever need to average the price like that? And that wasn't what the OP was asking, he wanted to know his breakeven price.

 

[skc]

If you read my initial post, it says - averaging the price only works if the no. of shares bought each time is the same. My statement is correct.

I am not disputing the fact that if you have purchased different number of shares that your method is correct.

Jono you have managed to bring the level of intellectuality to yet another level.

* picks up jaw from the floor *

You are confusing the term average price. "Average price" does not mean (to most people anyway) averaging the price. What you are doing is averaging the price (over the number of transaction) and that will equal the "average price" only if you bought the same number of shares.

Parcel 1: 150 @ $1.10 = $165
Parcel 2: 50 @ $0.70 = $35

The way you defined average price = ($1.1 + $0.7) / 2 = $0.9
Most people's definition of average price = ($1.1 x 150 + $0.7 x 50) / 200 = $1

If that's what you are trying to express, then it didn't come through I am afraid.

 

[ojm]

If you read my initial post, it says - averaging the price only works if the no. of shares bought each time is the same. My statement is correct.

I am not disputing the fact that if you have purchased different number of shares that your method is correct.

Why use a method that works out an average price where it only works with the same number of shares?

All you have to do it add up your total cost and divide by the number of shares purchased. A lot easier than any other method.

TotalCost = Parcel1Cost + Parcel2Cost + ...
NumberOfShares = NoOfSharesParcel1 + NoOfSharesParcel2 + ...
CostPerShare = TotalCost / NumberOfShares

 

[nathanblack]

what jono said is correct, his method works for the situation that both parcels are the same size. also he said it wouldnt work in cases that the parcel are diferent size...also correct.

although what he said is correct, i guess it means his formula is basically useless in 99% of cases. where as the other method is useful 100% of time.

correct me if im wrong, but i think jono is discussing the difference between average and weighted average. for the OP he needs to use weighted average(buying alot of shares at 1price will greatly effect your average).

 

[nomore4s]

correct me if im wrong, but i think jono is discussing the difference between average and weighted average.

When would you ever use the average like that though?

 

[nathanblack]

When would you ever use the average like that though?

in the 1 case he said it would work, ie both parcels are same size. i know its pointless, you know its pointless, im beginning to think jono knows its pointless? but it WILL work in that instance, which is all he claimed.

and when you look at the market, its all about price/volume. price alone is useless if volume is 1 share. but his definition of average is correct, there are man averages, mean, weighted, etc.

weighted is all we ever care about

cheers

 

[beamstas]

mind = blown

 

[nathanblack]

mind = blown

maybe you need to eat lunch?

 

[beamstas]

maybe you need to eat lunch?

Just cant come to terms with how some people can't grasp such a simple concept

 

[beerwm]

can someone explain it to me again?

... this is hard stuff

 

[nathanblack]

can someone explain it to me again?

... this is hard stuff

i like your humour. we can hope jono is just taking the pi$$ out of us, or he is a math geek?

 

[jono1887]

i like your humour. we can hope jono is just taking the pi$$ out of us, or he is a math geek?

hahaha... this has been quite humorous... yes, i must admit I did do 4U maths, although that is irrelevant as all we're discussing is averages :

 

[cuttlefish]

This whole thread has to be a gee up ... surely.

 

[skc]

I have spotted a market opportunity. I am going to write a computer program that will work out the average price of share transactions in ALL situations. There is clearly a need for such a tool in the trading community.

I know it's a big and ambitious project, but I think I can do it in about 3 years.
Look out for the BETA version that I will release in 12 months time. Welcome any feedback.

 

[nathanblack]

I have spotted a market opportunity. I am going to write a computer program that will work out the average price of share transactions in ALL situations. There is clearly a need for such a tool in the trading community.

I know it's a big and ambitious project, but I think I can do it in about 3 years.
Look out for the BETA version that I will release in 12 months time. Welcome any feedback.

My only concern is that in the 3yrs it takes you to develop the prgram, the way we calculate averages may change.

Perhaps rush it to market by simplifying the program to calculate average only when parcels are same size?

Then as a premium add-on, release the version that calculates average under all circumstances.

Overall you have a great idea, and if marketed correctly jono may buy it.

 

[Timmy]

I have spotted a market opportunity. I am going to write a computer program that will work out the average price of share transactions in ALL situations. There is clearly a need for such a tool in the trading community.

I know it's a big and ambitious project, but I think I can do it in about 3 years.
Look out for the BETA version that I will release in 12 months time. Welcome any feedback.

If I see any of my spreadsheet in it I WILL take legal action. I am planning on selling it to Goldman Sachs.

 

[beamstas]

I have spotted a market opportunity. I am going to write a computer program that will work out the average price of share transactions in ALL situations. There is clearly a need for such a tool in the trading community.

I know it's a big and ambitious project, but I think I can do it in about 3 years.
Look out for the BETA version that I will release in 12 months time. Welcome any feedback.

These exist.

 

[beerwm]

vote +1

for sticky thread

 

[wayneL]

Some good candidates for Federal Treasurer here.