I didn’t pencil it out on a spreadsheet…was more for illustrative purposes. That said, I was assuming 25% tax rate vs. 15% cap gains.
Under that scenario, it costs you $6.50 to hold (you pocket $95 if you flip, but $88.50 if you hold and the stock declines 10%). However, you have to add to that $6.50 the opportunity cost of the $95 you would have had in the bank (I’m assuming for 1 year). If this earns 5%, you are up to $10.06 in savings by flipping because of the earned interest of $4.75 less additional taxes of $1.19.
The point holds that you take on a good amount of risk by holding. With Opportunity Cost factored into your scenario, I get a breakeven of $99.44.
