Average cost | Robinhood

Average cost

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Robinhood defines Average Cost as the weighted average amount paid for shares (buys). It's calculated based on buy orders only. It doesn't change based on sell orders or the price of purchases transferred in through the Automated Customer Account Transfer Service (ACATS).

It's also an input to the total return calculation:

Total return = (Market price - Average cost) * Total shares

$513.11 = ($3,522.50 - $3,419.88) * 5

(calculation may reflect sub-penny rounding)

Average cost is used as a reference point for estimating unrealized gains, and not intended for tax purposes.

Cost basis is different

Cost basis is used for tax purposes, which is the original cost of an asset adjusted for any corporate action activity or a wash sale. The default method for your Robinhood account is first-in, first-out (FIFO), which is selling the shares you bought first. The shares themselves aren’t specifically tracked, but the cost associated with those shares is expensed first. Check out Cost basis for more details.

You can also review your account statements and tax documents for more insight into your historical cost basis.

Robinhood doesn’t provide tax advice. For specific questions, consult a tax professional.

Examples of multiple purchases

When calculating your average cost, you must include all purchases made while holding an asset. This calculation resets when you close out of a position in its entirety (zero shares).

Activity dateActivityQuantityPriceTotal amountAverage cost
Dec. 20Buy2$325-$650$325
Jan. 10Buy2$330-$660$330
Jan. 15Buy fractional0.55$320-$176$320
Jan. 15Buy fractional0.65$325-$211$325

Example of multiple trades

If you have multiple trades (buys and sells) but still own shares, the average cost calculates the weighted buy prices with the current quantity of the position. When selling, only the quantity changes in the calculation and the average buy prices will remain the same. As soon as a zero position is established, the average cost calculation starts fresh.

Activity dateActivityQuantityPriceTotal amountAverage costExplanation
Dec. 8Buy2$700-$1,400$7002 shares at $700
Dec. 9Buy2$300-$660$5002 shares at $700 and 2 at $300
Dec. 12Sell-2-$796$1,592$5002 shares at $500 with no change to average cost
Dec. 14Buy2$700-$1,400$6002 shares at $500 and 2 shares at $700
Dec. 16Buy2$800-$1,600$666.672 shares at $500, 2 shares at $700 and 2 shares at $800

Example of trading options

Buying and selling contracts outright has no impact on the average cost of corresponding open stock positions. The premiums aren’t included in average cost calculations for option expiration events (assignments or exercises). When one or more contracts go through an expiration event, the resulting purchase of shares and their purchase price (strike price of the option) are added to the weighted average purchase price. The resulting sale of shares reduces the current quantity of the position.

For example, if a long call is exercised, or a short put is assigned (results in buying shares), the number of contracts is multiplied by 100 shares, which is then multiplied by the strike price that’s included in the average price calculation.

Activity dateActivityQuantityPriceTotal amountAverage costExplanation
Jan. 11Buy2$700-$1,400$7002 shares at $700
Jan. 11Buy2$300-$600$5002 shares at $700 and 2 shares at $300
Jan. 11Sell-2-$796.45$1,592.90$5002 shares at $500 with no change to average cost
Jan. 11Buy2$700-$1,400$6002 shares at $500 and 2 shares at $700
Jan. 11Buy2$800-$1,600$666.672 shares at $500, 2 shares at $700, and 2 shares at $800
Jan. 12Buy2$100 Call$1,000$666.67No change
Jan. 12Exercise1$100 Call---
Jan. 12Buy100$100$10,000$132.062 shares at $500, 2 shares at $700, 2 shares at $800, and 100 shares at $100
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All investing involves risk.

Brokerage services are offered through Robinhood Financial LLC, (“RHF”) a registered broker-dealer (member SIPC) and clearing services through Robinhood Securities, LLC, (“RHS”) a registered broker dealer (member SIPC). Cryptocurrency services are offered through Robinhood Crypto, LLC (“RHC”) (NMLS ID: 1702840). The Robinhood Money spending account is offered through Robinhood Money, LLC (“RHY”) (NMLS ID: 1990968), a licensed money transmitter. Credit card products are offered by Robinhood Credit, Inc. (“RCT“) (NMLS ID: 1781911 and issued by Coastal Community Bank, Member FDIC, pursuant to a license from Visa U.S.A. Inc.

The Robinhood Cash Card is a prepaid card issued by Sutton Bank, Member FDIC, pursuant to a license from Mastercard® International Incorporated. RHF, RHY, RHC and RHS are affiliated entities and wholly owned subsidiaries of Robinhood Markets, Inc. RHF, RHY, RHC and RHS are not banks. Securities products offered by RHF are not FDIC insured and involve risk, including possible loss of principal. Cryptocurrencies held in RHC accounts are not covered by FDIC or SIPC protections and are not regulated by FINRA. RHY products are not subject to SIPC coverage but funds held in the Robinhood Money spending account and Robinhood Cash Card account may be eligible for FDIC pass-through insurance (review the Robinhood Cash Card Agreement and the Robinhood Spending Account Agreement).

Options trading entails significant risk and is not appropriate for all customers. Customers must read and understand the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount.

Commission-free trading of stocks, ETFs and options refers to $0 commissions for Robinhood Financial self-directed individual cash or margin brokerage accounts that trade U.S. listed securities and certain OTC securities electronically. Keep in mind, other fees such as trading (non-commission) fees, Gold subscription fees, wire transfer fees, and paper statement fees may apply to your brokerage account. Please see Robinhood Financial's Fee Schedule to learn more.

© 2024 Robinhood. All rights reserved.