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# Cost Per Share

## Calculate Cost Per Share with the Average Cost Method

Definition: The average cost method calculates the cost per share (excluding commissions and fees) of a stock position currently held by an investor. It only considers buy-side trades, ignoring the effect of sell-side trades on the cost per share. In other words, selling some shares of a stock won't affect your cost per share. Instead, the resulting profit or loss (P/L) becomes your realized P/L.
Calculation: Average Cost = (First Purchase Price * Quantity 1 + Second Purchase Price * Quantity 2) / (Quantity 1 + Quantity 2)

### Example

Action 1: Open a position
You open a position in Stock XYZ by purchasing 200 shares at \$200 per share on Monday, with XYZ's closing price being \$205 on that day.
By using the average cost method, your cost per share = 200 * 200 / 200 = \$200
 Cost Per Share Current Price Quantity Held P/L Unrealized P/L Realized P/L 200 205 200 1000 1000 0

Action 2: Reduce the position
You sell 100 XYZ shares at \$210 per share on Tuesday, with XYZ's closing price being \$215 on that day.
Your cost per share remains \$200, but the proceeds from selling 100 XYZ shares become your realized P/L.
 Cost Per Share Current Price Quantity Held P/L Unrealized P/L Realized P/L 200 215 100 2500 1500 1000

Action 3: Increase the position
You buy 100 XYZ shares at \$205 per share on Friday, with XYZ's closing price being \$215 on that day.
Your cost per share = (200 *100 + 205 * 100）/ (100 + 100) = \$202.50
 Cost Per Share Current Price Quantity Held P/L Unrealized P/L Realized P/L 202.50 215 200 3500 2500 1000