lcw77

m * (total-floor) = stock value

m = slope = positive value

assume total assets of 100 and a floor of 75.

2 * (100-75) = 50 in stock, 50 in cash. If things go well and stocks are up 50% from 50 to 75 we get 2*(125-75) = 100 in stock, 25 in cash....so we buy more stock as things get better using the cash.

The floor stayed at 75, but my cash fell to 25. Say stocks fall off to below original level (say down to 50$)....you have 2*(75-75) = 0 in stock, 75 in cash.