Saturday, January 04, 2014
Market Prophit Finds Predictability in Social Media
A new feature on Market Prophit’s site ranks bloggers who tweet on their ability to be correct.
Is there predictability in the stock market in social media? Igor Gonta of Market Prophit believes so, and has introduced a new feature to his company’s website that helps you find financial bloggers who have crystal balls that are polished and ready to go.
We looked at Market Prophit earlier this year, and liked what we saw ("Check the Buzz on Apple,” July 15, 2013), noting that it generated bullish or bearish signals about stocks based on posts being made to Twitter. The sentiment calculations are generated in real-time, based on proprietary analytics, and are updated every minute. Ranging from +1 (bullish) to -1 (bearish), you can view heat maps that translate the sentiment calculation into shades of red and green by sector or exchange.
The firm just launched its Market Prophit Score, which helps identify individuals who provide content that is predictive of market behavior. Each financial maven also receives a Market Prophit Rank, showing how each blogger ranks relative to his or her peers. If a person has a good predictability, a positive score is generated. If they have a negative correlation to stock-price movements, they get a negative score. If they’re just noisy, they get a 0.
Gonta believes that some bloggers may attain high scores in the twos and threes, while the lower-quality posters may end up in the negative two to three range. The analytics ignore a poster’s popularity, measured in terms of followers and retweets, because, as Gonta says, “We don’t think popularity has anything to do with predictability. Just because someone has 100,000 followers and tweets constantly about stocks doesn’t necessarily make them good.”
One feature Gonta points to is that the scoring mechanism can discover people you may never have heard of in the sea of millions of Twitter posters.
Clicking on the Top Ten Market Prophits links brings up a page with information about the current top ten prognosticators. In first place overall earlier this week was the Twitter account attached to The Options Pros, with a Markit Prophit Score of 2.282, which had recently mentioned Amazon (ticker: AMZN), Illumina (ILMN), Costco (COST) and Twitter (TWTR) itself.
Each stock analyzed on Market Prophit also provides details about the bloggers who are more focused. Poking around Market Prophit’s detail page for Apple, for example, the top three Market Prophits early this week had the Twitter usernames of @MW_AAPL (with a Market Prophit Score of 0.696), @DBainySun (0.587) and @A_Karunaratne (0.374). The first account, @MW_AAPL, is focused solely on Apple and is managed by MarketWatch, which is owned by Dow Jones, the parent of Barron’s. The other two are individuals. Clicking on a Twitter handle opens a new browser page with the most recent tweets displayed. You can also look at each maven’s user stats, which details the ticker symbols mentioned and the ticker-specific return and ranking.
ONCE YOU’VE IDENTIFIED BLOGGERS who provide information via Twitter that is positively correlated with a particular stock or sector’s return, you can add that maven to your Market Prophit dashboard and keep an eye on what they’re saying. You can also create an alert so that you receive an e-mail when they’ve put up a new tweet about your stock.
You can flip your display about a particular stock from what the crowd is saying to what the mavens are saying with a mouse click. Market Prophit is currently in its late beta testing phase and is free for now. Eventually, Gonta expects the site will offer subscriptions and premium content, and also provide an interface for brokers and other financial sites so that their content can be integrated with other third-party data.
If you’re using social media at all in your investing strategy, Market Prophit is well worth adding to your toolkit.
IT’S TIME FOR OUR 19TH ANNUAL review of online brokers. Help us refine the criteria for our survey by letting us know what is working for you with your online broker, and what is driving you crazy. If you’re not yet trading online, what feature could a broker offer that would entice you to sign up? Drop us a line at firstname.lastname@example.org .
Published in Barron’s, December 30, 2013.
Saturday, December 21, 2013
Holiday Gifts from Fidelity and TD Ameritrade
Toys for online traders in options, stocks and ETFs.
Fidelity and TD Ameritrade have added a few holiday goodies for their electronic clientele over the last six weeks. Both firms enhanced their features for options traders, but stock and exchange-traded fund investors got a little something, too.
In a recent meeting with Barron’s, Ram Subramaniam, president of Fidelity‘s retail brokerage and cash management businesses, explains that updates to the firm’s services are all designed to add value in some way. For instance, the mutual-fund giant’s in-house order routing system has amped up price improvement to an average of $5.32 per 1,000 share order, for which traders pay a $7.95 commission. Over the course of 2013, Fidelity has offered 76 ETFs, provided by iShares and Fidelity, that can be traded commission-free (as long as they are held for at least 30 days).
Active traders at Fidelity utilizing their Active Trader Pro platform (activetraderpro.com, or launch from within the Fidelity Website) will be able to use new options analytic tools, which include idea generation and live scanning. There are a variety of pre-defined options scans built in to the active trading platform, but for now, to run a custom scan you have to use the tools at fidelity.com. A new probability calculator lets you evaluate a variety of potential trades, and a flexible profit and loss calculator enables a trader to create synthetic positions that show a potential trade’s effect on her overall portfolio.
Additional tools for Active Trader Pro users include a new multiple-order trade ticket, which allows you to cue up to 50 orders, which you can activate whenever you wish. These orders are stored on Fidelity’s server rather than on your local computer, so you can access them whether you are using the Web-based version of the active trading platform, or the downloadable software. Traders can choose whatever order-routing method they prefer, or default to Fidelity’s designated liquidity manager for access to a variety of routes, including dark pools.
For those who are shorting stock, the process of finding shares to borrow has become fully automated this fall at Fidelity, so you can sort through the shares available, and understand in advance what fees might be levied. An icon indicating a stock is hard to borrow makes those easy to spot. Previously you had to contact a human to short most stocks.
Education has been a point of emphasis for Fidelity. An initiative open to everyone, whether a Fidelity customer or not, is Fidelity Labs (fidelitylabs.com), which has an online investing game called “Beat the Benchmark.” The game, now in Beta test, challenges novice investors to allocate assets in ways that will outperform a randomly chosen benchmark. As players advance, competing to “beat the benchmark,” each new stage introduces additional tools and potential investments.
“We’ve known for years that gaming could play a part in helping investors learn, and could potentially lead to better investment outcomes. By developing a game based primarily on feedback from novice investors, our goal is to co-develop the future of online investing education,” says Sean Belka, senior vice president and director of the Fidelity Center for Applied Technology, via e-mail. Belka notes that consumers have been involved in the development process, and their feedback will be used for incremental improvements. Check it out.
TD Ameritrade has added several tools to its Website that allow clients to manage a variety of real-time tasks on a single screen. “My Dock,” the biggest of the enhancements, permits users to tailor their experience by choosing between different trading and investing modules. You can create up to four columns of streaming data, including balances, watch lists, and news. The new account-overview page displays balances and positions with additional room for market news and alerts. Making it easy to navigate anywhere on the site in one click is the new Rollover menu, which is a welcome touch for a site that was getting more and more complicated.
An enhanced order entry ticket, called SnapTicket, can be set up so that it is displayed wherever you are on the TD Ameritrade Website, allowing you to keep an eye on your open orders. The One Stop Search feature enables you to look for anything you might want on the Website—symbols, keywords, research features, etc.—from a single location. These are all welcome creature comforts.
Charles Schwab has announced an “accountability guarantee,” which refunds the fee you have paid for advisory services if you’re unhappy with the service received in the prior quarter. This guarantee applies to Schwab Managed Portfolios, Schwab Private Client and Managed Account Connection accounts managed by investment advisors affiliated with Charles Schwab & Co., Charles Schwab Investment Management, Windhaven Investment Management, and ThomasPartners. Program fees are typically a percentage of the assets in your account, and the guarantee is in place to make sure you’re getting value for your money.
Our 19th annual review of online brokers is in the works. What is working for you with your online broker, and what is driving you crazy? Let us know at email@example.com .
Published on Barron’s Online, December 16, 2013.
Saturday, November 30, 2013
How To Make Dough
The creator of thinkorswim and tastytrade has created a new visual trading platform. We signed on for the beta test.
Tom Sosnoff can’t seem to sit still. The creator of the thinkorswim trading platform and the tastytrade Web-based financial video network is now testing a new visual trading platform called dough. The Electronic Investor signed on as one of several thousand tire kickers and recently had a chance to review the site. Here are our thoughts.
Dough acts as an analytical platform, helping you find profitable trades. It has six modules: a trading panel, a monitor of other traders, portfolio analysis, the Grid (which tracks stocks), an activity summary, and a trading journal. The interface guides you through constructing a trade, and is designed to show you the effect a trade will have on your portfolio. “We designed dough to put the fun and the challenge back into finance. Regardless of age and domain experience, dough engages through investible content,” says Sosnoff.
The interface looks like an iPad app in portrait mode. Buttons along the top of the screen let you choose from a variety of options strategies; setting up a stock trade is also possible. You can design a strategy yourself by dragging and dropping icons shaped like shields, which represent stocks, calls, or puts. Options are displayed with strike prices on the horizontal axis, and expiration dates along the vertical axis. As you build an order, one of dough’s key features comes into play: the probability of profit. You can adjust the order by, say, widening the spread on this screen, and the updated probability is displayed. Once you have an order you’d like to execute, pressing the Confirm button generates a text description.
The dough platform also connects to the live broadcast of tastytrade, as well as instructional videos about trading called doughtv. A group of traders (including Sosnoff) is displayed on the opening screen; you can follow one or more of them and see exactly what they’re trading. Each trader’s current return on capital and probability of profit is prominently displayed.
The Grid is a series of color-coded tiles that help you monitor the stocks in which you’re interested. You can add symbols to the Grid and manage a variety of watch lists. Each tile displays the current price, whether the most recent tick was up or down, and the net change in value for the day. The color of the tile—green for rising prices and red for declining ones—allows you to track your stocks.
There’s a circle in the middle of each tile that represents the stock’s volatility compared with its historical range. A nearly full circle indicates that volatility is high, which means that the stock’s price could change dramatically in a short period of time. A nearly empty circle means that its value is not expected to fluctuate wildly but rather shift gradually over time. Dough recommends that you look for stocks at the extremes of their volatility range to get the most out of price changes; the display lets you quickly scan for nearly full or nearly empty circles.
THE TRADING JOURNAL is a slick way to monitor your ideas and orders, and lets you store screen shots of your trades along with market data.
If you have a TD Ameritrade brokerage account, you can execute trades from dough; if you trade elsewhere, you can enter your trades manually. You can open a TD Ameritrade account from within dough and receive commission-free trades for 60 days. (TD Ameritrade purchased Sosnoff’s thinkorswim electronic brokerage in 2009, and the two retain close ties.) There could be other broker links in the future. Dough will be free once it’s fully up and running.
A recent show on tastytrade, which broadcasts eight hours of live programming every weekday beginning at 7 a.m. Central (the firm is based in Chicago), features Sosnoff’s daughter, Case, the business team’s director of Website development. She hosts Where Do I Start?—an entertaining way to learn about trading strategies as she peppers her father with questions that range from technical tips to musings about his sanity.
Case also represents dough’s target audience—who are tech savvy but still learning about investing. With its highly visual, almost gamelike, interface, dough could be the sort of tool that brings in newly minted options traders.
We found it to be a well-designed application that provides several unique tools. You can weigh in with your own beta test at dough.com.
Published in Barron’s, November 24, 2013.