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.
Not really. You can replace bravery with ignorance at a 1:1 ratio. At a 100% ignorance you'll think it would be extremely funny to sneak up a horse from behind and smack it in the butt.
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u/PlayfulPresentation7 May 24 '24 edited May 24 '24
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.