Compounding Calculation: Am I Doing This Right?

Community AMA
1

Hello,

I’m getting some crazy large numbers and want to make sure I’m using the right equation for compounding.

Starting point is $200.
Daily growth of 5%.
(Avg. of 252 trading days a year)

Take a look:
200(1.05)^252 = $43,725,356.73

This seems a bit off due to the size of that number. Any help with the equation (or confirmation thereof) would be greatly appreciated.

2

This is correct math. And is why the “I only need x% per day” statements are funny. Bc it’s obviously not that easy haha

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3

It’s doable until your account grows to a certain size. For example, right now it’s easy for me to enter and exit positions bc I’m buying one or two calls/puts at a time. But you can’t do that easily when you are talking about hundreds of contracts.

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4

Thanks to the both of you!

5

I saw this was already answered - but I thought maybe I could help a bit more.

Let’s say on this basis you choose to reinvest 50% of the previous day’s profits on average. After 252 days you would have $100,7796.18 Based on the average compounding factor.

As previously stated, at some point Yolo’ing your whole account daily becomes really unpractical.

I would maybe recommend setting some milestones, ie; (this is just an example, not a recommendation)
$200 - Daily goal 200.00 50% reinvest
@ Milestone 1 - “25,000.00”
Spilt Pot 30/70
30% pot - used with the goal of 5% daily goal
70% pot - used for 5% weekly goal

@ Milestone 2 - “50,000.00”

@ MileStone 3 - “100,000”

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