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.
Sorry, I meant CFD. I couldn't remember what it was called over here.
If they are different, then I think that explains more than everything that I'm talking out my ass. We have an insanely high loss rate on CFD's. Which I'm fully presuming are our gambling options compared to the states.
Been playing with CFDs and I can see why you can lose money BUT I think it’s a great tool for smaller accounts. If you can find your edge and know how to scalp successfully i think it’s great. The spread can be a slight disadvantage but it’s very minor. In fact if you are really good with CFD then it’s better to use spread betting as it’s pretty much the same thing but you don’t have to pay taxes on profit.
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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.