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Stock repair strategy vs averaging down: which fixes a losing stock?

Both lower the price you need to get back to even. Averaging down does it by buying more shares, which doubles your loss if the stock keeps falling. The stock repair strategy does it with options for almost no new money, but it gives up any gain above the new break-even.

Comparison · 7-minute read · Updated 2026-11-09

The short answer

You bought a stock, and it fell. Now you want to get back to even sooner. There are two common fixes.

• Averaging down: buy more shares at the lower price. Your average cost drops. So does the price you need to break even. But you now own twice as many shares, so a further drop hurts twice as much.
• The stock repair strategy: buy one call and sell two calls at a higher strike, for close to zero cost. Your break-even drops by the same amount. You add no new money. But you give up any gain above that new break-even.

Pick averaging down only if you'd happily buy the stock today with fresh money, at full size. Pick repair if you just want to get back to even and are fine stopping there. If you think the stock is broken, neither one fixes it.

Side by side

One losing stock, fixed both ways (hypothetical)

You bought 100 shares of Maple Ridge Energy, a made-up stock, at $50. It now trades at $40. You're down $1,000.

Fix 1: average down. Buy 100 more at $40, for $4,000. You own 200 shares. Your average cost is ($5,000 + $4,000) ÷ 200 = $45.

Fix 2: repair. With 90 days to expiry, buy one $40 call for $3.80. Sell two $45 calls for $1.90 each, $3.80 total. Net cost: $0. One of the $45 calls is covered by your shares. The other is covered by the $40 call you bought.

Here's what each fix does by expiry:

How the repair rows work, at $46:

• Your 100 shares: $46 − $50 = −$4 × 100 = −$400.
• The $40 call you own: worth $6 × 100 = +$600.
• The two $45 calls you sold: owe $1 × 200 = −$200.
• Total: $0. You're back to even, $4 below where shares alone would need to be.

Above $45, you're assigned on both short calls. You sell your shares at $45 and use the $40 call to buy and deliver the other 100. Every price above $45 ends at exactly $0.

What each fix really costs you

Averaging down: the drop

The top row is the danger. Maple Ridge falls to $32. Doing nothing loses $1,800. Averaging down loses $2,600. That is $800 more, on $4,000 of new money you added to a stock that was already falling. The lower break-even only helps if the stock turns around.

This is the trap the averaging down myth page covers in depth. A lower average makes you feel better. It also makes the position bigger at the moment it's going wrong.

Repair: the upside

Repair's drop row matches doing nothing: −$1,800, no worse. That is its real strength. You didn't add risk.

Its cost shows on the bottom rows. At $50, the shareholder who did nothing is back to even. So is the repairer. At $55, the shareholder is up $500, while the repairer is still at $0. You gave up every dollar the stock makes above $50 in exchange for getting back to even at $45.

Repair also has a clock. If Maple Ridge sits at $40 until expiry, all three calls expire worthless. You're where you started, minus fees. You can set it up again, but there's no guarantee the next round is free.

Which fix fits your situation?

A useful test for either fix: "If I had no shares, would I buy this stock today?" If the answer is no, both fixes are ways to stay in a trade you'd never enter.

Spreads need a higher options permission level at most brokers. In Canada, a TFSA or RRSP usually allows covered calls but not always the extra bought call, so check your broker. For every strategy in one view, see the options strategy comparison chart. If you end up with shares you're happy to keep, the wheel strategy shows how to sell calls on them over time.

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