Freeus, here it is:
Using the same parameters as before (i.e., on round trip per month, 1/4 bid/asked spread, $15 per trade, $100,000 to start with, etc.) the trade gets a return of around 15.6% compared to 20% for the buy and holder. But please note that as the size of the portfolio grows, the impact of transaction fees decreases. I have also made the implicit assumption of proportionate bid/ask differentials. That is, if the price of the stock were to increase to $160, the spread would be 1/2, and if the price were to fall to $40 the spread would fall to 1/8.
Here's the simplified approach. You buy stock at 80.125 (remember the spread!). At the end of the month the stock is trading at $81.2248. Taking off .125 to account for selling at the bid gives $81.0998, so the monthly increase is 1.22%. Annualizing this figure yields 15.62%, and this calculation neglects commissions. By comparison, the buy and holder also buys at $80.125, but at the end of five years he sells at $198.94 for an annualized gain of 19.93% (it isn't 20 because of the bid/ask spread).
TTFN,
CTC
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