Investor Brain

Saturday, June 24, 2006

A Hand for Heavy Lifters

First, a confession.  I made a huge mistake in the version of this column that was printed in Barron’s in the June 19 edition.  I had a correction published in the July 3rd issue, but here in InvestorBrain I have done some editing to get rid of the problem altogether.  If you have access to Barron’s Online, you can see the original messes.  I have posted the link at the end of this piece and of the July 3 column.

“HOW CAN I KEEP TRACK of my portfolio performance, especially when I’m trading more than just stocks?” It is one of the questions I’m most frequently asked, and there’s no single answer. It might be best to put your personal finance program, such as Intuit’s Quicken or Microsoft’s Money, to work. Or it might be worth checking out programs that are designed for heavier lifting.

Portfolio Systems, based in New York City, publishes several programs aimed at this group of muscular users that includes frequent traders and portfolio managers.

Of these, Option Money (last reviewed Oct. 29, 2001, “Exploring All Options"), intended for the very active individual investor, does a terrific job of tracking options positions as well as helping prepare your tax returns. The program has 40 options strategies built in, including a variety of spreads, butterflies, condors, straddles and strangles. The program’s analysis module provides the graphing of volatility, profit/loss and the “Greeks,” as well as other intriguing analysis.

Option Money also tracks futures, fixed income and mutual funds. If the 40 built-in trading strategies aren’t enough, you can create your own. Its reports, which can be customized, are helpful in figuring out which trades are working for you, and which are costing you money.

One of our chief criticisms the last time we looked at Option Money was that it required manual data entry. Portfolio Systems has fixed that in its current version 7 (development of version 8 is under way, and should be published later this year). You can now import transactions into Option Money from online brokers including E*Trade, Fidelity, Schwab, optionsXpress, TD Waterhouse, Ameritrade and others. The full list is available on Portfolio Systems’ Website, https://secure.scscompany.com/brokers.htm. (Note that some brokers, such as E*Trade, prevent you from downloading transactions during market hours.)

Option Money will set you back $30 a month, or a one-time payment of $345. Active traders who want to analyze their portfolio performance ought to look at the demo and take advantage of the free trial period.

For the professional portfolio manager, broker/dealer, hedge fund manager, family office or investor with multiple active accounts, Portfolio Systems offers Portfolio Director (http://www.portfoliodirector.com). This program offers consolidated reports, market data in real time, quick profit and loss calculations and the ability to generate numerous customized reports.

Portfolio Director is designed to be expanded as the number of users increases, and costs $150 per month for a subscription. It can import data from most online brokers, or the user can enter them manually. The opening page gives the user access to a number of summary reports that take various cuts at portfolio performance. In addition, the user can create a customized benchmark, such as a group of stocks or several indices, and use it for comparison.

Advisers will find client-management capabilities, such as templates for model portfolios, customizable reports and Web access to reports. Version 8 is currently available.

TRANSITIONS: I’VE HEARD from quite a few former Brown & Co. customers who have been transmogrified into E*Trade (ticker: ET) clients. Overall, this transition has gone significantly more smoothly than the Harrisdirect takeover, which began in January and dragged on for several weeks. I received about 400 e-mails complaining about that hand-off, and only 35 missives about the BrownCo linkup—several from people who were also Harrisdirect customers.

Harris had about twice as many customers as BrownCo, but the 90%-plus reduction in complaints tells me that E*Trade was better prepared this time around.

One of the biggest mishaps communicated to us involved a stock split the day the transition was completed. The customer promptly entered an order to sell off his post-split shares, but the transaction got seriously muddled, resulting in short sales, margin calls and a variety of other problems. I forwarded this customer’s complaint to my contacts at E*Trade, and an E*Trade senior vice president called the customer and fixed everything.

We’ve gotten several messages from former Brownies who wanted to know why they had to enter the cost basis for their positions manually once they were moved to E*Trade. Unfortunately, cost basis in Brown’s portfolio reporting was not available online, forcing customers to maintain it themselves. The lack of electronic storage meant the data couldn’t be transferred to E*Trade. The result? Some unpleasant data entry.

Original published in Barron’s, June 19, 2006.

Wednesday, June 21, 2006

TD Ameritrade Outage Generates Outrage

Over the weekend, TD Ameritrade implemented a security upgrade as part of their integration campaign to bring together the Ameritrade and TD Waterhouse platforms.  Unfortunately, the upgrade caused new problems, some of which prevented a bunch of former TD Waterhouse customers from logging in to their accounts

As usual, what happens as soon as an outage at a large online broker occurs, Barron’s readers notify me of the situation.  The notification is usually worded in a business-like manner, but some of those affected get frustrated by long waits on hold at their broker, and just cut loose when they write to me. 

What happened with the upgrade, according to TD Ameritrade’s Donna Kush, was that the TDW customers were sent to a different login page.  At their former login, they could opt to store their user ID, but that was not automatically stored at the new site.  So folks who were used to having their computer enter that long string of numbers had to dig out the account number and type it in again.  And again and again, since the new system, for security purposes, doesn’t store their account numbers.

During the process TD Ameritrade also experienced what Kush calls “some technical issues,” which resulted in some former TDW clients not being able to log into their accounts.  Kush reports a backlog of customer support calls on Monday, but says that volumes dropped off Tuesday and today. 

Kush says that TD Ameritrade fixed the problem ASAP, is implementing a software change tonight, and will continue to monitor the situation.  “We expect that that will help improve the situation as soon as possible.  We’ve also contacted affected clients by email and phone to apologize and explain the issue.  We’ll continue to give them updates on the situation,” Kush says.

I took a look at some of the message boards that discuss TD Ameritrade at Yahoo Finance and saw a lot of anger.  I’m getting emails asking how long it takes to get an account moved to another broker.  That process takes long enough that it shouldn’t be done lightly or in anger, folks.  And some brokers charge a fee to move your assets away, though others will pick up the cost upon request.  Hmm.  Sounds like a good excuse for part of a column sometime. 

Saturday, June 10, 2006

Nasdaq's Live Floor Show

THE NASDAQ IS MORE THAN JUST a high-tech all-electronic stock exchange.  Thanks to all the transactions processed on the board, it’s also a place that collects a great deal of data about price movements and volume. 

The NASDAQ now offers a variety of data products such as TotalView, which displays every quote and order at every price level on all Nasdaq National and Capital markets stocks available for execution at the Nasdaq Market Center. That way, traders get a better idea of what the actual market is for these stocks. Several online brokers, including Scottrade and a number who utilize the RealTick electronic trading platform, now offer TotalView to their customers. It is otherwise available for $70 a month for professionals and $14 per month for non-professionals.

To see what Nasdaq (ticker: NDAQ) has cooking, check out its experimental data page at http://emi.nasdaq.com. Its newest real-time offering is Market Velocity, which is designed to give investors who aren’t working on a live trading floor access to information that a floor trader could glean from the surrounding action, according to Nasdaq executive vice president Adena Friedman. Instead of hearing the buzz about a stock or seeing others gathered at a certain location on the floor, Market Velocity aggregates current arriving orders, and compares them to the average activity in that stock over the prior three months. As a result, a trader is alerted to shifts in market direction, momentum or liquidity in individual stocks that might suggest future price moves.

“We look at this particular point in time, relative to the base and see whether there is more activity or less, says Friedman. “It’s comparable to traders running around with tickets on the floor.”

Market Forces, another recent Nasdaq entry, breaks Market Velocity data up into buy or sell interest, which can suggest whether the heightened activity is about to move the stock price higher or lower. A real-time feed, Market Forces is most useful for frequent traders who focus on a particular set of stocks and want to know the intra-day dynamics of certain shares.

“This is the start of a new genre of market data that we’re creating,” says Friedman. “It’s meant to be more analytical in nature to take advantage of things coming in to our system that will help traders determine trends in stock pricing.” Both Market Velocity and Market Forces are part of Nasdaq’s Market Analytix data package.

Check with your data provider or online broker to see if they have Market Velocity or Market Forces available (they aren’t being offered independently by Nasdaq) and at what, if any, cost.

INTERACTIVE BROKERS (http://www.interactivebrokers.com) sponsored a Trading Olympiad for college students earlier this year ("Get With the Program,” Nov. 7, 2005) in an effort to identify some of the best and brightest up-and-coming techies.

Starting with an account of $100,000 in phantom money, University of Texas graduate student Patrick Christmas earned an additional $120,000 in 10 weeks using computer algorithms he developed for Interactive Brokers’ Trader Workstation Application Program Interface.

The victorious Christmas won a very real $50,000, which IB will match in a donation to his grad school in Austin. The electronic brokerage paid out a total of $307,000, including $1,000 each to 100 participants. “Anybody who entered and made a penny won $1,000,” says executive vice president Steve Sanders. To top it off, the company hired the fifth place winner, Li Zhiyan, of the University of Toronto.

Any IB customer can open a paper trading account and test to their heart’s content, says Sanders. “We simulate whether there would be a fill or not (whether an order would be filled), so when someone puts in a limit order we simulate the fill based on whether that price and volume were available,” Sander says. Recently, IB added all of its global products to the paper trading platform as well.

New features include Volatility Trader for options traders, and SpreadTrader for futures spread trades. More on these features in a future column.

JUST ARRIVED FROM optionsXpress (http://www.optionsxpress.com) is Xtend, which brings streaming quotes and many features of direct trading to the browser. To launch it, click on Streaming Quotes, then customize the screen to your specifications. Unlike many software-based trading applications that are stored on a single computer, this one allows the user to set up layouts that are accessible wherever he or she logs in.

Right-clicking on a bid or ask brings up a quick way to enter an order, displaying three prices near the market if you want to enter a limit order. Click on one of the prices to generate an order ticket. Options-spread information is built in, as is real-time futures pricing and order entry.

A trader can use some of the Xtend screens, plus favorites from the optionsXpress browser-based tools, such as StrategyScan and Dragon. “That’s why we call it Xtend—it extends your browser,” says optionsXpress President David Kalt.

Published in Barron’s, June 5, 2006.