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Selling shares at different prices


Guest MrPhoenix

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Guest MrPhoenix

Hi all, 

 

New to this. Just wondering, if I buy 50 shares at £5 and then 50 shares at £8, when I go to sell 50 shares later on, which ones get sold? 

 

Thanks!

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the 50 you sell will just be sold at the prevailing price., its not a case of which lot/tranche get sold.

 

So you buy 50 at £5 (£250)

Then buy 50 at £8 (£400)

 

You have spent £650

 

If you then sell 50 of them, and the current price is still £10 then (50x10 = £500) You will be left with 50 shares worth £10 = £500

 

If you then sell 50 of them, and the current price is still £4 then (50x4 = £200) You will be left with 50 shares worth £4= £200

 

 

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Guest MrPhoenix

Thanks for your reply. 

 

So as I understand, once you pay the price for the shares, the only thing relevant is the average price of them all at the time, and how many you have? 

So If I bought 50 shares at £10 and 50 shares at £5 and the current price is £7.50, then I have 100 shares worth £750 and that's my break even point. I'm not at a 'loss' on the shares I paid £10 for. 

 

Am I getting that right? 

 

Kind regards

 

 

 

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The price you care about is the current price, and if you ahve bought at different prices then your current value of your holding is a blended price, or average of your purchases.


For example.

You buy 50 at £10 = £500 outlay and 50 shares

you buy 50 at £5 =  £250 outlay and 50 shares

 

you own 100 shares (=50+50 shares) and have paid £750 in total for them ( £500+£250 cost)

 

If the current price on the day is £7.50 then 100 shares x £7.50 = £750. You are at b/e (minus transaction costs)

If the price later moves down to £5 then £5 x 100 shares = £500 you have a book/paper loss of -£250 

If the price instead goes to £10  then £10 x 100 shares = £1,000 and you have a £250 paper profit. this can be released by selling.

 

 

But if you had £750 to spend in total, then you'd want to get the best price possible, so if you waited and bought all your shares when the price dropped to £5 then £750/£5 = 150. You now have 150 shares. If these then rose to £10 then 150x£10 = £1,500.

A profit of £750 on the initial stake of £750.

 

However it sounds like you should spend a bit of time paper trading, looking at the shares you are interested in, making a note in a journal, making a theoretical 'buy' and tracking how they would have performed over  a couple of months. This would give you a better idea :)

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Yes, that's correct. The shares are collated so in your example the loss on one order is off set by the profit on the other. If you were to partially close the position there would be no distinction between the ones bought at £5 or £10, the partial close would be subtracted from the collated group.  

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Guest MrPhoenix

Thanks for the clarification guys. 

 

I'm up and running but sometimes I get curious about the mechanics. 

 

Not doing too bad for a rookie but lot's to learn. 

 

Enjoy the rest of your week. 

 

Kind regards. 

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