A.I.M. Users Bulletin Board

[The Grabber]

Hi Adam, Tom:

As with the % of Transaction, the larger the transaction size the larger the profit in dollars. The commission as a percentage of Profits also drops.

Using the Round Trip as an example helps people understand the total cost of doing business.

Sometimes I think we get hung up on the % of profit that commission costs represent.
And as you mentioned commission is part of the total cost of doing business.

One could or should look at this from a net return on capital invested instead.

So on a Sell trade of $1000 triggered by a 30% gain on shares sold:
- The investment was $770 (cost of shares sold).
- The round trip commission to execute was $20.
- The Net Return is $210.
- The Return Rate is 210 / 770 = 0.273 or 27.3%

That's not a bad return for an equity warehouse!

Just food for thought.