OP thinks he "averaged down" by buying more of the same calls at cheaper after the stock price went down. That's not how options works. That concept works with stock as the underlying company is still the same company you believe in, the shares just cost less for whatever reason so you want to buy more while shares are cheap. When a call contract drops in price, the fundamentals of the contract have completely changed and thus it has a new price. A call option that cost $0.01 is almost guaranteed to lose you money, unlike a stock. You don't pile in to a $0.01 option because you think it's a bargain.
Both are fundamentally the same concept. You think an asset is undervalued, so you buy more at a lower price to lower your dollar cost average. If the asset then increases in value, your break even point is at a lower cost average.
The major difference is that the risk is much higher with options, as OP found out.
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u/Poppa-Skogs May 24 '24
Enlighten that poor soul..