The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again at optionalpha.com and welcome back to the daily call. Today, we are going to answer another member question which is, “Should you dollar cost average when trading options?” I think there's two key concepts that we have to describe, first of all. One is this concept of dollar cost averaging which is the idea that when you buy stock and if the stock goes down and you like the investment or presumably, you think there's value in the investment that you continue to buy in small increments all the way down. If a stock is trading at $100, you buy say 10 shares. Now, the stock is trading at $98, you buy another 10 shares. Your average blended investment is now $99 per share. You’re averaging down as the stock continues to move lower. Now, the concept is not easily applied in its I guess, regular form to options trading. This would assume that if we wanted to dollar cost average in options trading that if a particular strategy that we’re trading goes down in value that we would