TM Reddit Mentions | ChartExchange

Sorry it took so long for me to get back to you, I had to move my Dad.
The **average price** of anything is just the **total cost** you paid for a bunch of them, divided by **how many** of them you own.
Say it's boxes of cereal, and you buy 1 box for $4.00.
Then say next week they're on sale for $2 and you buy another box.
You can probably see straightaway that your average cost is $3 *per box*, but here's the math:
($4 + $2) / 2 boxes = $3 per box
That's your **average** price.
Now say it's stock in XYZ.
You like it and think it'll go up, so you buy 1 share for $100.
Now say it goes up to 102, and you still like it, so you buy 1 more share for $102.
Average price: (100 + 102) / 2 = $101 per share
What's cool about it is that now you have an ***average*** **purchase price you can compare to** ***today's*** **price.**
You're up $1 per share, *on average.*
Then maybe you'd like to keep adding to your position, so every week you buy 1 more share. And say those purchase prices look like this (keeping the original 2):
100, 102, 103, 102, 104, 105, 103, 105, 106, 108
Now you own 10 shares of XYZ at those prices.
But how well have you done overall?
Simply add them up and divide by 10:
$1,038 / 10 shares = $103.80 *per share*
So now that XYZ is at 108, *on average* you're up (108- 103.80) = $4.20 per share.
It works the same way for options.
Maybe you buy 1 LEAPS Call for $1.00, then tomorrow buy another one for 1.05, then the next day, another one for 1.10.
Add those dollar amounts up and divide by 3 to get $1.05 as your *average cost per option.*
**What's your ticker, and what Calls do you own?**
I can look at it and maybe give you a better idea of what's going on.
But you're on the right track with theta decay, and if the stock has gone up "multiple dollars," then you'd expect its LEAPS Calls to go up in value also.
But there's definitely a balancing act going on between the value of the underlying stock and time (plus volatility, but let's hold that constant for now).
Oh, I just thought of something: are these Calls **out** of the money?
I'm going to bet they are, and that's why you're seeing what you're seeing.
But go ahead and tell me the ticker and which strike in what expiration.
Back to the balancing act:

If the underlying stock stayed **flat**, we'd expect the Call option to lose money day by day. That's theta decay at work.
Take the Extrinsic Value and divide it by the DTE, and that's about how many cents it should lose per day.
But let the stock go **up** a little, and now the value of the option should go up too.
And it goes up *at the rate of Delta.*
So if the stock goes up $1, and the option is at 80-delta, then the option's value should go up by 80 cents, $0.80.
$1.00 x 0.80 (Delta, as a percentage) = 0.80
That's where we make our money, the option's value going up when the stock goes up.
But your options losing value (down from 0.83 to 0.49) while the stock goes **up** doesn't make sense.
Unless the options are **in** the money, in which case Theta might simply be overpowering Delta.
As an aside, that's why it's SO important to buy options deep ITM, 80-delta or better. Even 90-delta. Or even the first 1.00-delta strike you hit.
And that's because ALL of an **O**TM option's value is Extrinsic and subject to theta decay.
Whereas only a FRACTION of an **I**TM option's value is Extrinsic and subject to time/theta decay.
Think of the Extrinsic value as the 'rent' you pay to "control" 100 shares of XYZ. That rent ticks away day after day. If the rent is high, then you'll lose money faster than the stock going up can make up for it.
Take care,
Mike