average up

Average Up

The process of buying additional shares at higher prices. This raises the average price that the investor pays for all the shares. In the context of short selling, averaging up is achieved by selling additional shares at a price higher than that of the first transaction.

Notes:

Say you buy XYZ at $20 per share, and as the stock rises you buy equal amounts at $24, $28 and $32 per share. This would bring your average purchase price to $26 per share.

See also: Adding To A Loser, Average Down, Dollar-Cost Averaging, Short Selling

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Average up

A strategy used by investors to lower the overall cost of shares by buying as many shares with a given amount of capital in an increasing market. Buying $1000 worth of shares at $30, $35, $40, and $45, for instance, will make the average cost of the sharesx $36.65, lower than the average price of $37.50.

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average up

To purchase shares of the same security at successively higher prices. When averaging up, the investor accumulates an increasingly larger position in a security while keeping the average cost of the position lower than the security's current market price. Such an investor will earn significant profits only if the stock price continues to rise. The investor will suffer substantial losses if the stock price quickly drops after he or she has established a large position at increasingly higher prices. Compare average down.