when refer to their annual compounded return as 30% p.a, does this factor in the leverage multiple as well.
ie. if one is trading a leverage instrument, say a full contract futures that has an initial (intrday / overnight) margin component as well as a maintence margin compement, total a 3:1 debt/equity ratio. And they achieve a 30% return for the year using that trading that instrument :
- does that really mean a 90% return on equity (30% x 3)?
- or is the return on equity 30% (and on the instrument actually 10%)
I am just curious to see how people calc this?
Also, say for instance some has a 100K in their trading account but they only touched about 50K to trade with. If they say they achieved a 20% return, are they basing it on the 50K or are they referring to the 100K?
just curious, thank s