Average cost | Robinhood (2024)

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 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.

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). Reinvested dividends (DRIP) and fractional buys are also included in the calculation, on a weighted basis.

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.

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.

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