Saturday, November 17, 2012

TD Ameritrade Upgrades "thinkorswim" Trading Platform

The online brokerage adds features to help options investors better execute covered-call trades.

TD Ameritrade recently upgraded its sophisticated thinkorswim desktop-trading platform, making a particular bid to win over even more options investors.

Widely available by mid-December, the “Covered Call Roller” helps automate the process of closing a soon-to-expire call an investor has sold and opening a new position with a future strike date.

Steve Quirk, a vice president at TD Ameritrade, which bought thinkorswim in 2009 to supplement and inform its own broader-based systems, explains that the universe of customers trading options is expanding.

And since covered calls are considered a “gateway strategy” for those new to options trading, since they can be used to augment an investor’s existing long positions, he’s been looking for ways to make their trading easier and more understandable. Some of the technology used in the Covered Call Roller eventually could be extended to other options strategies.

Rolling a covered-call position, which is created by buying a stock while selling a call for a date in the future, requires that you have a clear view (bullish or bearish) on a stock. The software then provides you with several choices, including the time of day the order will be placed and where in the spread you want the price set.

A customer can also choose the number of days before the existing option contract expires. These variations can help a customer make his or her trading less discernible to rival traders who can recognize patterns and profit from them.

Various alerts are built in to let investors know that the operation is under way. For now, the Covered Call Roller works for monthly and quarterly expirations, but Quirk says the firm also would like to include weekly expirations.

Weekly options trading is approaching 20% of all options transactions at parent TD Ameritrade.

Aside from the options improvements, there have been some interesting additions to thinkorswim’s graphing capabilities. When designing a chart, an investor can now set the number of ticks or designate a specific time period to be aggregated in a candlestick bar. The customization should make the charting geeks happy.

Another impressive part of the upgrade is the Product Depth Curve, which offers a view of the futures market. The display includes a graph of the market price of each contract month for any given futures product. It allows an investor to look at the overall market for, say, a Eurodollar or natural-gas contract, to see if there are any unusual disruptions or anomalies to the normal curve that might offer an opportunity.

An investor can go deeper into the analysis by adjusting the time frame or overlaying a historical curve on top of the current curve. These aren’t huge changes to the thinkorswim trading system, but they are welcome incremental improvements for the self-directed investor.

Here’s an update to an earlier column: Earlier this year, securities clearing outfit Penson Worldwide ran into financial trouble and closed down its business. It transferred the operations to a new firm, Apex Clearing, which is run by options market maker Peak6 Investments. Apex immediately changed the formula for setting deposit requirements for brokers, which caused a lot of unhappiness, particularly among smaller online specialists (see Barron’s, Electronic Investor, “Clearing Firm’s Exit Will Cost Brokers,” June 23).

Apex Clearing’s CEO Danny Rosenthal checked in with us recently to provide an update. He explained that his firm has reached an agreement under which many of the smaller correspondents, mostly regional broker-dealers, will shift their clearing to another firm, COR Clearing. That will relieve some of the pressure on the smaller firms and allow Apex to focus on the technology-based brokers that it wants to serve. COR, which has undergone its own restructuring, is the former Legent Clearing.

The planned transfers will take COR’s customer count to 200, from an estimated 75 late last year. And Rosenthal can sleep a little easier. “There were a lot of big problems when we came in, and we’re fixing them,” he notes. “We’ve got things on track, and it’s relatively peaceful right now.”

Published in Barron’s, November 12, 2012. 

Posted by twcarey on 11/17 at 04:14 PM
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