Ask the Institute

DATE: May 19, 2014


Can you explain the concept of Dollar-Cost Averaging?

Dollar-Cost Averaging, or as this concept is more commonly called, Averaging Down, is a technique by which an option trader buys more of a security at a lower price than the price at which an initial quantity of the security was purchased. The purpose of this lower-price purchase is to reduce the average cost of the total position in the security. To learn more about the concept of Dollar-Cost Averaging, view this segment of "Ask the Institute."