Diluted Cost

The term "Diluted Cost" represents the break-even price during the period from opening to closing a position, meaning that during the time the position is held, each addition to or reduction of the position could either increase or decrease this cost price. The calculation includes the profit and loss of each transaction within the holding period (excluding commissions and other fees), taking into account both purchases and sales, as well as changes due to corporate actions such as dividends.

Calculation formula:

For a long position, Diluted Cost = (Total amount bought during the holding period - Total amount sold during the holding period - Cash dividends received during the holding period) / Current holding quantity

For a short position, Diluted Cost = (Total amount sold during the holding period - Total amount bought during the holding period - Cash dividends received during the holding period) / Current holding quantity

Cost update logic: The diluted cost is updated after every buy or sell transaction.

Average Price

The average opening position cost represents the cost corresponding to the held position, considering only the addition to the position (excluding commissions and other fees), and does not account for the reduction of the position. The reduced position has already been converted into realized profit and loss.

Calculation formula: Average opening position cost = (Average cost before opening * Quantity before opening + Amount of this opening) / Quantity held after purchase

Cost update logic: After a successful opening transaction (long position opened by buying, short position opened by selling), the opening cost will be updated. However, the average opening position cost is not updated upon liquidation/establishment of a position.

Unified Cost Calculation Rules

Unified cost calculation rules apply to both the diluted cost and the aaverage price:

If there is a transaction in the same direction within the same day, such as clearing and rebuilding a long position within the same day, the system will treat it as a 'T' transaction and continue to calculate the cost based on the data during the holding period.

However, if it is a transaction in a different direction, such as short selling - closing the position - buying long within the same day, the cost will be cleared after clearing the position, and the calculation will start anew upon rebuilding the position.

Case Illustration of Cost Calculation

The difference between the aaverage price and the diluted cost lies not only in the different calculation formulas but also in the different updating mechanisms of the two costs. Users can set their own cost calculation method according to their needs.

Case 1:

A client has the following transactions on stock A:

March 1, Buys 10 shares of the stock at HKD 239, holding 10 shares

March 2, Sells 5 shares of the stock at HKD 245, holding 5 shares

March 3, Buys 10 shares of the stock at HKD 240, holding 15 shares

March 4, Stock A pays out dividends of HKD 150

The diluted cost is (239*10 - 245*5 + 240*10 - 150) / (10 - 5 + 10) = 227.67

The average price is (239*5 + 240*10) / 15 = 239.67

Case 2:

This case involves multiple intraday transactions and a change in the position direction.

Cost Switching Method

The system currently supports two options for cost pricing: diluted cost and aaverage price. The default is diluted cost, and if you need to change it, you can select from 'Asset' - 'More' - 'Portfolio Settings' - 'Cost Calculation'.

Note:The cost price is provided for reference only, with asset details subject to the information in your statement. In the event of corporate actions or stock conversions, the calculation of cost price and profit/loss may not be precise, but this will not affect the overall value of your assets.