The in-house survey was conducted April 22-25, 2008, via email to 3,000 TradeKing clients, with an estimated 95% confidence level.  The survey results were segmented into two client groups: those who trade “options only” with TradeKing and those who trade “equities only.”

“The results from our April survey seem to indicate that, although investors remain cautious, they feel the worst developments in some areas of the economy may have passed,” said Don Montanaro, CEO of TradeKing. “TradeKing investors are starting to move on from the subprime mortgage woes and focus on how oil prices might impact industry and consumer spending over the next few months. With a surprising number of clients reporting ‘better than expected’ investment returns this past quarter, they see there are still opportunities to win in a volatile market.”

On the personal finance front, active investors indicated they are responding to the current volatility in the market by adjusting investment strategies, trimming energy costs and household budgets, and considering more foreign investments.

—Twenty-nine percent of OT, 34.7 percent of ET reported adjusting to the new economic conditions by “trimming ... energy consumption”;

—Thirty percent of OT, 21.3 percent of ET are “switching investment strategies to respond to recent market volatility more effectively”;

—Twenty-one percent of OT, 21.8 percent of ET are “considering foreign investments to balance out the falling dollar”;

—Twenty-one percent of OT, 21.3 percent of ET are “trimming ... household budget spending”;(2)

—Twenty-two percent of ET respondents also favored “‘buying on the dips’ to lower my cost basis on some long-term holdings.”

In addition, the majority of respondents who will be receiving the one- time economic stimulus tax rebate said they plan to use the funds to either pay down personal debt (credit card, mortgage, student loans, etc.), or invest in the market.

(1) The Reuters/University of Michigan consumer sentiment index, April 2008.

(2) See recent New York Times article reporting on how consumers are cutting household costs, http://www.nytimes.com/2008/04/27/business/27spend.html?_r=1&scp=1&sq=recession+diet&st=nyt&oref=slogin
(Due to length of URL, please copy and paste into your browser)

Freelancing is not for the faint of heart, especially these days.  What makes it especially tough for me right now is that quite a few of my recent columns had time value to them.  The one I was writing that got postponed 2 weeks ago is now past its expiration date in terms of news value, so it just won’t run in spite of the work I put into it. 

I sure hope the next one runs before it’s obsolete.  Wish me luck.  Or go buy some ad pages in Barron’s and insist that they run next to The Electronic Investor.  I’ve got a kid in college!! 

The highlight of the weekend was the Cardinal’s win over defending champion University of Wisconsin-Osh Kosh on Saturday afternoon. Stanford won the first set, 25-21, but Osh Kosh would not go away quietly. The second set turned into a 40-minute battle, featuring 6 Osh Kosh set points and 3 Stanford match points before Stanford put it away with a score of 35-33. This match attracted one of the larger crowds of the day, including the enthusiastic support of the Stanford women’s club volleyball team.

During their first match of the tournament, Stanford challenged the eventual Division I champions, Lakeland College (Wisconsin), in pool play. In addition to Osh Kosh and Lakeland, Stanford also competed with the University of Maryland, University of Missouri, Naval Academy, Cal Poly, University of Santa Clara, Northern Illinois and the University of Minnesota over the three days of tournament play.

Key players for the Cardinal were setter Matt Sahagun, libero Evan Huck, outside hitters Andy Price, Darren Moore, Guillermo Vargas and Danny Koelker, as well as middle hitters Greg Newman and Daniel Becker. Walter Foxworth stepped in to provide numerous defensive plays, as did Peter Kardassakis. Middle hitter Jayson Morgan and outside hitters Kevin Scott, Matt Hill and Kent Anderson generated points for the Cardinal as well. (club website: click here.)

The league in which Stanford plays, the Northern California Collegiate Volleyball League, was among the most successful at the tournament. Six teams finished in the Top 20 nationally (CSU Fresno, Cal Poly, Cal, University of Santa Clara and UC Davis). Chico State won the Division I-AA championship, and Sonoma State was the runner-up in Division II. The tough competition all season long gets every member of the NCCVL ready to play at nationals.

And so the men’s club team wraps up its third, and most successful year in club history. Stanford students with volleyball experience are encouraged to join the team when school resumes in the fall. In the meantime, there will be informal open gyms at Burnham Pavilion on Tuesday nights starting at 8:30PM. 

Launched in 2004, the Open Bond Market offers U.S. Treasuries and CDs (certificates of deposit), as well as corporate, municipal, government agency and principal-protected notes. The fees were lowered last year to $1 per bond (subject to $8 minimum); Treasuries can be traded at no cost.

IN THE WAKE OF BEAR STEARNS’ RECENT COLLAPSE, industry analysts worried about the financial stability of the Customer Assets Protection Company, which carries the brokerage firm’s coverage beyond that of the mandatory Securities Investor Protection Corp., or SIPC, coverage. Capco is backed by a consortium of brokers and SIPC is funded by member-brokers. SIPC covers individual accounts up to $500,000, and firms like Capco cover amounts in excess of that. (See “Are You Covered If Your Broker Fails?,” Dec. 17, 2007, and “If Your Broker Goes Belly Up, Part II,” Dec. 31, 2007 for more.) A Bear unit is a major securities-clearing firm and therefore handles transactions for lots of regional banks and brokers. The concern is that any failure would jeopardize these trades.

Standard & Poor’s issued a bulletin on March 19 in which it said that Capco is maintaining its A+/Stable rating, in spite of the claims that may ensue in a post-Bear Stearns universe. Of interest is the rating agency’s assertion that “In the event of an excess SIPC claim related to Bear Stearns, Capco should benefit from a guarantee provided by JPMorgan Chase for Bear Stearns’ obligations. In addition, clients withdrawing funds from their personal accounts actually reduces CAPCO’s potential maximum loss.” (Sentence Italicized by Barron’s.)

As the S&P bulletin spells out, SIPC, and excess coverage like that of Capco, is aimed at restoring missing, lost or stolen accounts. They don’t cover a decline in the market value of a client’s investments.

We’re looking at a problem of market value, which was adversely affected by management choices that turned out to be inappropriate, rather than outright theft. Alas, there’s no insurance against poor judgment.

A BARRON’S READER WHO’S A CUSTOMER OF A MAJOR online brokerage and lives outside the U.S. described an interesting situation via e-mail recently:

“I am a long-time investor who generally purchases shares of undervalued micro-caps that are often thinly traded, which I usually hold for periods of over a year. In recent months, my broker is refusing to allow Internet purchases for many of these companies, requiring me to phone a broker. They are vague about why they are doing this; for legal and security reasons, they say. This requirement has even been in place when I wanted to add to a holding that I originally purchased in an Internet trade, and when I tried to adjust the price of an open order by a few pennies.”

My theory, verified by the broker in question, is that the trading pattern—even though it’s completely above board—resembles that of a crooked pump-and-dump scheme that usually involves stealing an online trader’s identity and then redirecting his account to buy securities at huge premiums that benefit the thief. The broker, in my view, is being appropriately cautious, particularly since this is a ploy often used by overseas scamsters. It may be really inconvenient for an honest trader, which is a terrible drag, but it’s just part of the current reality.

The writer’s broker verified that it monitors securities for suspicious activities and will, from time to time, restrict those transactions until the client phones a broker so that the firm can verify that he or she is in fact a client and not an identity thief. “It is for the protection of our clients that we make these decisions, and while we realize that it can be an inconvenience to them, it is done with their best interests in mind,” says the broker.

More patience—or a change in investing strategy—may be needed.

Published in Barron’s, April 7, 2008

Claude Courbois, head of product development at Nasdaq/OMX Data Products, says that Market Replay was born out of a frustrating problem he has encountered as a small investor—executing an order, but finding that he has paid a price that appears to be higher than the current quote.

The question an investor asks himself when this occurs is uncomplicated: What the heck happened? But getting an answer isn’t easy.

The small investor doesn’t have the tools for retrieving quotes at an exact moment. If that person complained to Nasdaq and it agreed to help, Courbois relates, “we would have to pull quotes out of a database and rebuild the order book to figure out when something weird had happened. It was not a user-friendly experience.” He says that the Market Replay system is intended to give people confidence and understanding of the markets—not to catch brokers doing something bad.

To use Market Replay, you enter a stock symbol and a date, then the time you want to examine—for example, 10:15 a.m. The standard replay is 10 minutes of market time, but you can request an hour or a day. The pertinent data get pulled into the program in 10-minute increments; it can take some time to download the information if you try to get a long-time-span record of an actively traded issue. Currently, 2008 trading data for Nasdaq securities are available, and the Data Store is moving backward through 2007.

If the information for a requested date hasn’t yet been loaded, the customer will get a message stating, “We don’t have this data ready yet, but will have it tomorrow morning.”

When the replay is downloaded to your computer, you’ll get a list of available information under the “Replays” menu on the display’s left side. A vertical blue line in the middle of the screen denotes the time requested. A few minutes of additional data, showing earlier and later prices, will be displayed on either side. Users can move forward and backward to the exact time that the trade went through, and take a screen shot that captures the display. Hit “Play,” and you can watch the market move in real time. You can also pause it and play it backward.

The program can also do a time-span analysis by highlighting a range around the time of your transaction that will display the range of prices at the Nasdaq and other exchanges during the specified period. “It’s comforting to be able to prove to yourself that you’re getting the best price. It’s amazing how valuable information is, even if you know the system usually works,” says Courbois. “You can find times when a price is available for literally a millisecond; no way to see that unless you have access to this kind of data.”

By the end of March, Courbois says, the program will cover NYSE- and Amex-listed shares, too. It’s fascinating for a data junkie to be able to track market movements, like the craziness that erupts at the close of the trading day or the action when news hits.

The Data Store would like to work with brokers to create tracking numbers for transactions, similar to those UPS and FedEx use for packages. Customers would simply click on the number and get a replay of the transaction. “One of the biggest problems any broker has is educating customers so they understand why something happened,” Courbois concludes. “This product helps investors gain confidence in the markets.”

Published in Barron’s, March 24, 2008.

As the S&P bulletin spells out, for an excess SIPC claim to occur, all of the following must happen: client assets must be found to be missing, lost or stolen, and customer property, SIPC advances, fidelity bond proceeds, if any, and distributions from the general estate of the member, if any, to customers are insufficient to satisfy customer account obligations. Neither SIPC nor excess SIPC cover a decline in the market value of a client’s investments.  Clearly the Bear Stearns collapse is not due to missing, lost or stolen customer assets. 

We’re looking at a problem related to market value, which is due to some management choices that turned out to be inappropriate, rather than outright theft. 

Too bad there’s no insurance that protects against inappropriate choices.

By THERESA W. CAREY

TURNING THE COMPLICATED INTO THE SIMPLE is a basic aim of online brokerage. It means bringing together the prices of everything from Nokia shares to options on South African gold to U.S. Treasury bonds on a single platform. It means simultaneously offering insights into Malaysian politics and Florida housing costs while organizing millions of electronic messages from global bourses for data, orders and transactions into information that investors can act on instantaneously.

Read the entire story here: Best Online Brokers

As a quick and easy starting point, always be sure you see the letter “s,” as in “https,” preceding the Web address of a site at which you’re entering personal or sensitive information. The “s” is a standard indication that the site is secure. Another is the padlock icon in the lower right-hand corner of the browser window. Even so, these indicators can be duplicated by some very clever fraudsters.

ONE METHOD THAT BROKERS use to thwart troublemakers is a token that generates a series of numbers that change every minute or two. Clients use these momentary passwords to log in to their accounts. The password’s life span is too short for a hacker to steal it. This, however, requires customers to carry the token around with them, usually on a key ring or in a wallet.

James Burton, a senior vice president at Fidelity’s retail-brokerage unit, says his firm employs extensive physical, electronic and procedural security controls, regularly modifying them to meet changing technology threats. Fidelity’s encryption standards turn the data you send across your Internet connection into gobbledygook, unless the computer receiving the information can decode it. Fidelity.com, like many brokerage sites, will automatically log you off after a short period of inactivity, which is designed to prevent unauthorized access or keystrokes by either a co-worker or a mischievous household pet that wanders onto your keyboard.

Another ploy that crooks use is changing your account’s address so that future checks come to them, or rerouting online money transfers to their coffers. Most brokers now require added security for these kinds of changes. OptionsXpress, for instance, sends out a notice to both existing and new addresses when a customer requests a change.

TD Ameritrade is rolling out a two-factor authentication system that “remembers” the computer from which a client logs into its system. If the next log-in attempt comes from a different computer, the investor will need to provide more information. CEO Joe Moglia says, “Clients have free access to security software via our online security center (http://www.tdameritrade.com/security/securityTools/securityTools.html), which enables them to detect and remove threats like computer Trojans and to monitor for suspicious behavior.” (Trojans are viruslike programs that travel via the Internet.)

TradeKing employs an intriguing system to thwart keystroke loggers—who keep track of every keystroke you make. These thieves can use your keystrokes to divine your password and personal information. To prevent that, TradeKing has you enter your password on an on-screen keyboard, using your mouse to select the appropriate characters. If you don’t type your password, a keystroke logger can’t pick it up. TradeKing also asks you a series of challenge questions if your online behavior is deemed unusual.

Software-based brokers such as Terra Nova don’t transmit information via a Web browser; they employ other methods of security. Terra Nova utilizes Captcha technology, which prompts the customer to type in the letters displayed in a small picture, to eliminate spammers and counter other electronic contact attempts. It also maintains an intrusion-detection system on its Website and database servers, to identify any attempted contact that is suspect.

AT ANOTHER SOFTWARE-BASED BROKER, MB Trading, President David Lipsett says, “We use proprietary algorithms to prevent unauthorized trading within an account as well as databasing user-connection information to spot trading that does not fit into the client’s normal patterns.”

Just how many challenges are out there? Consider Siebert CEO Muriel Siebert’s response to our queries: “The layered security consists of firewalls, encryption, intrusion-detection sensing, network segmentation, translation, monitoring, antivirus, antispam, antispyware, internal software and hardware lockdowns, premise-level security, employee screening and other security methods.”

Be safe.

2.  Even after repeated requests over a number of years (dating back to at least 2001), Bacon’s lists my title as “Technology Editor, Barron’s.” I am NOT the technology editor.  I write the Electronic Investor column for Barron’s every other week, and also author the annual review of online brokers.  I contribute to a number of other publications, if their budget can accommodate my outrageous requests, and my focus is—and has been since 1991—financial technology.

I do not cover employment trends.  I do not write about toys during the holidays.  I avoid reviewing computers, printers ... hardware in general.  But the title Bacon’s has bestowed upon me, and which they REFUSE TO CORRECT, nets me all kinds of stuff that is way outside my bailiwick. 

3.  Companies send me books, gadgets, press releases, and countless emails based on the bad listing in Bacon’s.  This is a huge waste of resources all the way around.  I try to be polite to the PR people who have paid a bazillion dollars for their subscription to this faulty resource—it’s not their fault that Bacon’s has me listed wrong and refuses to correct it.  But it gets very difficult when I’m on deadline and a PR rep for a cell phone ring-tone creation software company, or the rep for the next version of Guitar Hero, calls me.  I don’t cover that stuff!  Much of it ends up in the Barron’s office in New York, which generates even MORE resource waste when a kindly person there boxes it all up and ships it to me in California. 

4.  My listing apparently leads some people to believe that I not only work in NY, but that I am a full-time employee of Barron’s.  I am a freelancer, which means I send stuff to Barron’s when it’s assigned, but other than that I have no contact with the gang in New York.  If you contact me about the latest and greatest gameware, or about a management change at some tech firm, not only will I not write about it, but I don’t know who would.  Don’t ask me.  I don’t know. 

Hey, why don’t you look through that copy of Bacon’s and figure it out?  What?  It’s out of date and isn’t helpful?  WHY are you PAYING for it then??

5.  I have begged, pleaded, threatened, cajoled, and generally harassed anyone I can find at Bacon’s to fix this thing.  I made my first request to fix my listing IN PERSON at a trade show.  I found the highest-ranking mucky-muck I could and asked her to make this correction.  Whenever they send me an “Update your listing” email, I update it ... and then my listing never changes.  The last time I talked with someone at Bacon’s, I asked them to just delete my listing completely and pretend I don’t exist. 

6.  Lots of my writer pals have said that their listing in Bacon’s is wrong, and they can’t get it fixed either.  I’m not taking their incompetence personally (though it’s tempting when the phone rings at 6AM).  Bacon’s is the journalistic equivalent of the Roach Motel ... we can get in, but we can’t get OUT.  Or corrected. 

7.  I have yet to get a contact that was generated by my Bacon’s listing that resulted in an article.  What the hell is wrong with these people??!?  Are they making more money by misrepresenting me? 

PR people, please ... if you’re using Bacon’s as a resource to guide you to media folks, do some homework.  There’s this cool thing on the Internet called a “search engine.” (My personal favorite is Vivisimo (http://www.vivisimo.com), but there are others you may have heard of like Google or Yahoo.) Type in the name of the journalist you’re considering contacting and read a few recent articles. 

Does it appear that your product falls within this person’s general range?  If not, save yourself some time, and save the journalist a 6AM phone call. 

To great fanfare, Bacon’s put out a press release a couple of years ago saying that they’re now “monitoring blogs” and are including that sort of information in their database as well.  Fabulous.  Maybe they’ll pick up my rant and fix my damn listing! 

For investors on the go, thinkorswim has a new wireless trading platform for BlackBerrys and other mobile devices called thinkMicro. (Do you detect a pattern in the firm’s product names?) A set of trading gadgets called thinkPod can be linked to Websites such as those for news, and allows you to place trades without having to be logged into the thinkorswim software or Web application. Sosnoff and his firm have launched a quarterly magazine, thinkMoney, “which mixes advanced trading articles with our feeble attempts at satire.”

OPTIONSXPRESS (http://www.optionsxpress.com) is coming off an important year in which its founder, David Kalt, moved on. CEO David Fisher, who took the reins last October, says the firm’s “culture of persistent innovation” continues. OptionsXpress was among the first retail brokerages and the only Web-based online broker to offer portfolio margining, which bases margin requirements on the sum of an investor’s positions, including options, rather than individual holdings. Other firms offering portfolio margining ("New Options for Traders,” Oct. 30, 2006) are software-based and focus on very frequent traders.

“To ensure that we would be first to market with portfolio margin and that the integration would be seamless, we built all of the functionality in-house,” says Fisher.

Another goal achieved: integration of XpressTrade’s futures platform. ("Out of the Pit: Futures Go Online”, Jan. 14) “Our customers can now trade futures side-by-side with securities on a state-of-the-art platform,” Fisher says.

E*TRADE (http://www.etrade.com) added some muscle to its Web-based trading platform as well as to E*Trade Pro, its software-based platform for frequent traders. A big change was the addition of E*Trade’s Global Trading Platform, which provides U.S.-based retail investors the ability to trade stocks online in six foreign markets in local currencies. The new Global Trading Platform also features free real-time international quotes for the six markets (Canada, France, Germany, Hong Kong, Japan and the U.K.), and a redesigned customizable “Global Markets” page with free company-specific research from Reuters for the relevant markets.

E*Trade also expanded its roster of research tools, such as a redesigned online research center, with new features and links including intraday commentary and blogs from Seeking Alpha; enhanced market and news pages; daily trading ideas from MarketHistory.com and E*Trade’s “Most Popular” (a daily list of the 10 most frequently viewed symbols by E*Trade customers); and other news. Still more new goodies include MarketEdge, Second Opinion reports, an integrated and extremely spiffy stock screener, and a redesigned mutual-fund and ETF research center.

Customers of E*Trade Pro can now see every market maker involved in a given stock with free access to TotalView and OpenView data through the Market Depth window. A graph and a momentum bar provide traders with visuals of what they used to have to conceptualize themselves with Level 2 data. Also included: a suite of powerful new tools for options re- search—streaming Greek options chains, expanded market data and customizable inputs for calculations. For the last of these, a user can access the new Options Model Setup window to customize how analytics are calculated by choosing a pricing model (Black-Scholes or Binomial), statistical volatility, interest rate and more.

ROOKIE OPTIONSHOUSE (http://www.options-house.com), which launched in January 2007, introduced Virtual Trading, giving customers the opportunity to practice trading with all the site’s tools and capabilities—without risking their own money. On deck for this year are advanced order types, tax optimization and reporting tools from Maxit, and a new stock-screening tool.

We’ll just have to wait and see who the winners are.

Published in Barron’s, March 3, 2007.

If your Schedule D is less complicated, however, the programs do a good job of making the process relatively painless. We examined H&R Block’s TaxCut Premium Federal + State + E-file ($69.95) and Intuit’s TurboTax Premier ($74.95), and also took a look at 2nd Story Software’s TaxACT Ultimate Bundle ($19.95).

Part of our review is an attempt to import a large file of transactions from an online broker. This test account has about 300 options transactions, so it’s a good way to stress-test a tax-prep program.

TaxACT (http://www.taxact.com) doesn’t import data automatically from online brokerage accounts, which means you must do it manually. It can download them via Gains-Keeper, which is an add-on capital-gains program provided by some online brokers; it can also import W-2 data directly from a small set of employers.

We found TaxACT very simple and a definite bargain, but with few of the creature comforts found in its beefier cousins. The interview is conducted in the top portion of the screen, while the bottom part displays the form you’re filling in. It gave me a 1990s flashback. It is inexpensive, however, so people with more time than money should consider this program.

Even cheaper is TaxACT’s online bundle, a mere $16.95. The price for both CD-based and online Ultimate bundles includes one e-filing for both federal and state, which is quite a bargain.

TaxCut (http://www.taxcut.com) and TurboTax (http://www.turbotax.com) remain the heavyweights. As in years past, TurboTax did a better job parsing the large transaction file. Another nice feature: TurboTax is able to find the purchase price of a stock you bought long ago, which helps if your record-keeping is spotty. Provide the date you purchased a stock or mutual fund, and TurboTax fills in the closing price for that date as your cost basis.

TurboTax also allows you to import data from a huge range of banks, online brokers and other financial institutions.

A feature enhanced in this year’s TurboTax is Live Community, which lets you get feedback on tax-prep questions from TurboTax support staff and other users. That could come in handy in those last few April days before returns are due.

E-filing costs an additional $17.95 per return (federal and state), which makes TurboTax software the most expensive of the lot. TurboTax Online’s Premier version, however, is $49.95 and includes a free federal e-file. There isn’t a huge gap between online capabilities and the CD-based program any more, so using the online version will save you some money.

TaxCut has a feature called “Worry-free Audit Support” for returns filed electronically that were prepared with its software. The support aids with IRS communications, helps prepare for an audit and sends an H&R Block agent with you should that unhappy circumstance occur. Also included: free tax advice from a professional.

TaxCut simplified its user interface, and the program is easy to navigate. You can find your way around the interview quickly, using a multi-level tab-menu system. TaxCut also has a Macintosh version, and its Online service, which includes an e-file, is $44.95. The online Signature offering, which is $79.95, lets you use the Premium version to enter your tax info, then send it to an H&R Block tax pro who will review, edit, sign and e-file your return.

H&R Block just released an online tax- preparation program called Tango ($70, http://www.hrblock.com/tango), which promises a cool and fun (yes, fun) tax-prep experience, but its investment tracking isn’t enough for the typical Barron’s reader.

We like TurboTax for the investing do-it-yourselfer, and the peace of mind offered by TaxCut for those less confident about their accounting mojo.

If you choose to prepare your taxes online, do it early. Though all the tax software publishers say they’ve beefed up their systems so that last-minute filers won’t face slowdowns, I’d rather not be beta-testing that promise at midnight on April 15.

Published in Barron’s, February 11, 2008

“In a SIPA proceeding, there are two kinds of property as to which customers have preferred treatment: “customer name securities” and the fund of “customer property.” Customer name securities are identifiable to particular customers because they are registered in the customer’s name and can be negotiated only by the customer.  If in the possession or under the control of the failed broker when the broker is placed in liquidation, customer name securities are returned outright to their owners irrespective of value.  All other property (cash and street name securities) held by the broker for its customers becomes part of a “fund of customer property.” Customer property is distributed pro rata among customers.  To the extent of any shortfall in customer property, SIPC makes up the difference, within certain limits.

To illustrate:

Q.:  Assume that a customer is owed $1 million in customer name securities, and $1 million in securities held by the broker in street name.  Assume also that 10% of customer property is missing.  What does the customer get?

A:  The customer receives:
(i) $1 million in customer name securities.
(ii) $1 million in securities of which $900,000 will come from customer property and $100,000 from SIPC.”

If you have any questions, I will be happy to try to answer them.  If there is another method for passing this information on to your readers (e.g., a letter to the Editor), please let me know.

Thank you for your help.

Josephine.

In addition, Fidelity makes some of these same backtesting tools available on Fidelity.com free of charge to site visitors. The site tells you in some detail what backtesting is and offers a lot of specifics on what it can do for the trader. Among the queries it answers: What kind of information will you get when you run a backtest? What is a trading signal, and how does it work? You’ll also find a description of the advantages and disadvantages of this approach.

Jim Burton, Fidelity’s senior vice president in charge of retail brokerages, says “We want people to understand backtesting concepts going in. We don’t want to just hang a tool out there and invite people to have at it without giving them an idea of whether they should use it.”

The tools are categorized by strategy into six generic technical buckets; Fidelity plans to add more over the next year. Within each category, you’ll find educational content that provides sample charts and explanations and discusses related benefits and risks. Burton says, “We want people to be prepared going in for possibilities of winners and losers.”

FOLLOWING THE FINAL INTEGRATION of the TD Waterhouse site into Ameritrade’s suite of tools, the recently relaunched TD Ameritrade Website (http://www.tdameritrade.com) features numerous new bells and redesigned whistles. The firm acquired options trade-analysis toolmaker Market Gear last year, and has launched Options 360, a tool designed to help traders and investors locate added market opportunities and better manage risk.

Options 360 is a graphically intense tool that lets the user see the impact of a variety of factors—time decay and stock- price volatility among them—on the performance of a particular option. It also allows the investor to perform a range of “what-if” analyses on a portfolio, assessing hypothetical changes.

You can also use this feature to look for trends and seek out trading opportunities by analyzing the volatility history of stocks and options. Options 360 lets you save and test trading strategies, and provides a probability-based evaluation of outcomes.

FOR LONG-TERM INVESTORS, TD Ameritrade has launched Wealth Ruler, which is designed to let customers create an investing plan. Developed in-house, Wealth Ruler gives the user a disciplined planning process. The tool currently lets you include stock and bond holdings, but will expand over the next few months to bring in mutual funds and options.

The tool evaluates your portfolio and then, based on your stated goal, walks you through the steps to arrive at a new target allocation. Toward the end, you can hit a button and it will create a series of orders that will rebalance your portfolio.

Another useful new tool for TD Ameritrade customers is Bond Wizard, which was designed to demystify fixed-income investing. Through a partnership with one of the larger bond clearinghouses, ValueBond, the program helps clients create an online bond ladder. The ladder tool lets you see potential bond cash flows and maturities, picking and choosing from the available inventory to suit your needs.

Interactive Brokers (http://www.interactivebrokers.com) has made serious strides in filling some of the gaps in its offering this year. One cool new tool, the Risk Navigator, lets customers slice and dice their portfolios to determine value at risk, profit-and-loss potential, and the various Greek calculations. The Risk Navigator lets you view your portfolio by industry, and combines a profit-and-loss graph with a table showing how changes in the market affect your individual positions as well as your overall portfolio. It’s an intriguing innovation, and implemented in a way we’ve not seen in a free tool before.

IB HAS ALSO RESPONDED TO CUSTOMER complaints about ease of use by redesigning its Traders Workstation (TWS) with an easier look and feel. The redesign includes an Order Wizard that categorizes order types and shows you why you’d use them. TWS now allows you to place over 40 order types, such as basket trades (a group of individual orders that are saved in a single file and submitted as a package), icebergs (which allow you to submit an order, generally a big one, while publicly disclosing only a portion of it), or market-if-touched. (This last is an order to buy or sell an asset below or above the market; this order is held in the system until the trigger price is touched, then submitted as a market order).

The account window within TWS also has been redone and can be customized.

A new Contract and Securities Search feature, available from IB’s Website (rather than from within TWS), is a streamlined display of all available futures and options contracts and securities, making these asset classes easier to find. All these additions make the whole site much easier to navigate. Barron’s gives its awards to promote just such changes.

Futures, which allow traders to speculate on everything from pork bellies to orange juice to currencies to housing starts, is a highly regulated business. In the past, investors who wanted to trade in futures either had to open an account with a specialized broker or have multiple accounts with a single broker that offered futures as well as other types of equities. The idea was to keep futures separate, as a precaution.

OPTIONSXPRESS GOT INTO FUTURES trading in early 2007 by acquiring XpressTrade. Says Dan O’Neil, an XpressTrade principal who’s now executive V.P. of futures trading with optionsXpress: “Part of the reason optionsXpress has been successful is that we’ve taught people how to use options. Now we think we can do the same with futures.” Buying XpressTrade brought in 10,000 clients who now can be joined by optionsXpress customers with access to the new platform, provided their accounts permit futures trading.

When the XpressTrade platform was initially integrated, it was quite limited, but during 2007 there were many enhancements. Customers can trade all kinds of futures on a single platform from one account. “All the transfers are seamless to the client—we do all the regulatory stuff on the back end,” O’Neil says.

The most popular contracts, listed by type under the “Products” tab, fall into such categories as indexes, energy contracts, interest rates and currencies. “Having all the products is one thing, but we’ve also got a ton of tools on the site, letting people evaluate what to trade and then execute,” O’Neil adds.

Almost all the futures contracts available on the platform are optionable. O’Neil believes that his customers will be able to apply their options knowledge to options on futures. “All the fundamentals of options and strategies are transferable from stocks to futures,” he notes. You can see the options on futures capabilities by clicking on “Futures Spreads,” “Options” or “Options Spreads” on the futures order form.

In an effort to introduce more overseas products, optionsXpress is rolling out foreign futures over the course of Q1 2008. “We want our clients to take advantage of those markets if they want,” says O’Neil.

The platform includes newsfeeds from Barron’s sister Dow Jones Newswires, a variety of research newsletters (like those of Jim Wyckoff as well as the Hightower and Vardon reports) and charting. All the futures-related information is accessible from the futures order-form screen. Says O’Neil: “Futures tools are different from stock tools, but going forward we will apply our existing stock and options tools, when applicable, to futures, too. We’re applying all our educational might to futures, as well, putting presentations, online demos and XpressGuides on the site.” A sample topic: “How can you use futures to hedge your bond portfolio?”

CURRENT OPTIONSXPRESS CUSTOMERS have to sign a couple of online forms to add futures trading to their accounts. The process is quick and straightforward, based on my experience playing with a test account. OptionsXpress is not trying to attract the day-trading futures aficionados with this platform, but is looking for ways to help customers diversify their portfolios. O’Neil believes the futures market today looks a lot like the options market did in 2001, as retail investors started getting involved. “Things have gotten a lot better for the retail customer recently,” he concludes.

Those concerned about the safety of funds devoted to futures trading should note that commodities are not covered by Securities Investor Protection Corp. insurance, the way stocks and bonds are, should a dealer go bankrupt. All funds have to be separated from the firm’s capital, which is why most brokers require customers to open separate accounts for commodities trading.

Still, losses owing to dealer failure are few and far between. According to the National Futures Association, such problems “have been virtually nonexistent.” (source: http://www.nfa.futures.org:80/investor/Storybehind.asp). Mind you, that doesn’t refer to client trading losses.

Published in Barron’s, January 14, 2008