promotion image of download ymail app
Promoted

Principal amount vs net amount?

So i have a usaa brocker account where you get free trades and i'm just getting into trading. I'm a little confused about a transaction.

So i purchased a stock at 43.7 at market price

and i sold the stock at 44.5 through a limit order.

these were common shares

The net amount for the purchase was 446.85-principal was-437.90

and the sell net amount was 436.04 principal was 445.00

I know this is a meager difference, but shouldn't there have been like a 9 dollar profit?

If you're slapping your head because this is basic stuff, once again, i'm new to this.

2 Answers

Relevance
  • 8 years ago
    Favorite Answer

    Apparently your trades are NOT free ($8.95 each way) - discuss this with USAA. BTW - that $9 would give you a 2% holding period return. If your holding period was only for one calendar quarter, that's not bad! There's no "given" that you could repeat this, but if you received and reinvested that 2% each quarter your annual return would be 8.24% - very good! (1.02^4 -1 = 0.0824 or 8.24%)

    BTW - there's no guarantee that you will receive the price you set for the "limit order" - the broker is obliged only to TRY to get you this price. If the stock is falling quickly, it may be filled for less than that. Just something to keep in mind for the future...

    • Commenter avatarLogin to reply the answers
  • 8 years ago

    The brokerage firm charges fees for executing your order. So for the buy order costed 446.85 - 437.90 = 8.95. The sell order costed 445-436.04 = 8.96.

    That's how the brokers make money. The more you trade, the more money they make.

    • Commenter avatarLogin to reply the answers
Still have questions? Get your answers by asking now.