as usual your sharp mind shows through...well, i was trying to simplify the thing here...in most non-leveraged situations compounding is of course well accepted such as eg. mutual funds, equity portfolios, etc...
in leveraged situations it's more tricky...i would say with profunds/rydex compounding is a reasonable assumption (up to a point) but with options and futures there is definitely a size limitation in trades and also it might difficult for most traders with $ millions in capital to risk, say, 20% of total portfolio on a single options or futures trade...
i have thought about this issue quite a lot...and that is one reason is like eod trading in profunds...risk is limited by daily index moves and trade execution is not a problem either plus shorting is just as easy as going long...
so my idea is to apply mutual funds-like compounding over the years based on trading FULL portfolio of leveraged profunds funds...granted the risk is high here so one normally has to have considerably more wins than losses and considerably LARGER wins than losses...
well, if it was that easy, everyone would be ...<ggg>
george
