Each sector report contains a single-page on 100 to 150 companies, pinpointing current and historical financial data and providing 15 color-coded charts intended to convey earnings quality at a glance. It’s not a sorting or screening service; Laudani envisions the user flipping through the charts and making note of companies to research further.

“What I wanted to do was put everything that you look at on one page and let you flick through it. You didn’t have to know all the symbols of all the companies in each sector—you could just move from one company to the next, looking for ideas.”

One portion of the report is based on fundamental data and includes figures like days of inventory and annual free-cash-flow growth. The charts display quarterly items from the income statement, balance sheet and cash-flow statement such as operating margin and net working capital. If the trend is negative, the chart is colored red; positive trends are green. A sideways trend appears in yellow. The color-coding makes it easy to identify key trends.

The iPad app’s focus is on earnings quality, which isn’t necessarily reflected in static data. For instance, rising sales-per-employee figures might look like a positive, but they could simply be a result of unannounced layoffs that you’ll have to dig deeper to uncover.

“You can screen stocks all day and get lots of numbers, but they’re just numbers,” says Laudani. “The stuff you see on the Internet is all the same: chart different stocks 10 different ways, look at consensus estimates and dividends—so what? I wanted to provide something different that conveyed a sense of earnings quality.”

Initially, Laudani had considered issuing his reports in Adobe Acrobat’s PDF format, but when the iPad arrived, he realized it was a better platform.

In flipping through the sample materials sector, I found the organization into sub-sectors—aluminum, diversified chemicals and precious metals, etc.—helpful in making direct comparisons of similar companies. Navigating around the report, however, is a little clumsy. A progress bar at the bottom of the screen that lets you to go back to the table of contents or jump to a different page took some getting used to.

The Website for Laudani’s business is shortideas.com. As he publishes a second edition for each sector, Laudani plans to offer annual subscriptions. He thinks investors will find the reports interesting. “Is there a reason why this stock is going up and that stock is going down?,” he asks. “Instant Analyst is an ideal app for curious investors.” Drop the 99 cents on the materials sector to see if you agree.

KAPITALL GENERATION (kapitall.com), an online investing platform, has produced a video, aimed primarily at those new to investing, that explains Facebook’s upcoming IPO. It’s short, just 2½ minutes, and can be found at kapitall.com/fb. Did you know that approximately 8.5 billion minutes are spent daily looking at Facebook by its 901 billion users? As the video notes, that’s longer that it would take to walk to the sun and back twice.

A NEW ONLINE INVESTING SERVICE, Motif Investing (motifinvesting.com), came to our attention a while ago. It’s still in late-beta mode, but the firm is accepting customers. It’s an interesting idea, which we’ll soon review in depth. We mention it now because investors are being offered commission-free trades in May as Motif ramps up.

Motif Investing gathers groups of stocks that are set up by general interest—say, biotech, senior care, or home improvement. Each motif features 20 to 30 stocks, and when you buy into a motif with a fixed dollar amount, you own the stock individually—even fractional shares. You can customize each motif as you wish. The usual commissions are $9.95 for a motif, or $4.95 for a transaction involving a single stock.

Published in Barron’s, May 7, 2012. 

If the site unearthed some funds I wouldn’t discover elsewhere, I might be willing to wade through all that. But in my test, the picks weren’t much different from what I got from other fund screeners.

I set up a screen looking at performance over the past three years for a broad basket of commodity funds and compared it with Fidelity’s Mutual Fund Evaluator. The top two funds on the FundReveal list in this category were Classes D and B, respectively, of the Pimco Commodity Real Return Fund (PCRDX and PCRBX). Class D was second on a list from Fidelity, and carries a five-star Morningstar rating, while Class B was fifth with Fidelity and had four stars from Morningstar.

The top-ranked fund from Fidelity over the past three years is the Direxion Monthly Commodity Bull 2X (DXCLX). While it gets only two Morningstar stars, FundReveal generally likes it, awarding a “B” risk-return rating, second only to “A.” Scouring its 20,000-fund database, FundReveal finds just 61 funds that performed better than the Fidelity pick.

There’s an old saying for analyses like FundReveal’s: a long run for a short slide.

THE MOST RECENT INCARNATION of E*Trade’s iPhone app lets you get quotes or place an order using voice recognition. By tapping the microphone icon at the top corner of a screen and stating an appropriate command, you can now place trades while dashing from your car to the commuter train. This capability will be added to the Android app later this year.

E*Trade has also added the ability to scan a bar code on a product and get details on the parent company, if it’s publicly traded, for both iPhones and Androids. TD Ameritrade launched a similar feature earlier this year. Strolling through a store has never yielded so many investment ideas.

“Our mobile platform continues to grow and has become an increasingly important extension of how customers do business with us,” says Michael Curcio, president of E*Trade Securities. “These enhancements demonstrate how we continue to add innovative functionality to the mobile experience.”

AS ELECTION YEAR HEATS UP, my inbox has been the target of a few too many e-mails that have “Forward This to Everyone You Know!” in the header. These are the times when a good hoax-detector comes in handy, and the best may be Hoax Slayer (hoax-slayer.com). It could be better in terms of design and layout, but its content is top-notch and its price—free—is irresistible.

Besides debunking various hoaxes, the site offers terrific advice about recognizing and avoiding scams, online fraud, or phishing schemes. It also has links to a list of seemingly bogus e-mails that are actually true. And that video of a dog dragging another dog off to the side of a busy road while dodging traffic? It really happened.

The Urban Legends Website (snopes.com) often has more-complete explanations of hoaxes, along with an attempt to explain where a hoax came from, but I’ve found that Hoax Slayer gets their reports up faster. And in their brevity there is often the soul of wit.

Published in Barron’s, 4/23/2012. 

A key benefit of a cloud-based active-trading platform is that it lets you store your layouts and preferences on Schwab’s server, rather than your own machine. This means you can have the same screen setup, no matter where you’re located, or what device you’re using.

Already, several online brokers utilize the cloud; Keough notes that many brokers’ Websites and hybrid platforms have been cloud-based for years. Fidelity, for example, has a “bridge” application that provides streaming functionality. It launches from activetraderpro.com; you can customize the layout, and then save it, so you can access the same software layout from any computer. TD Ameritrade’s Trade Architect, optionsXpress’ Xtend, and tradeMonster’s basic platform also allow clients to customize the layout and user tools, and save those settings for use on another computer.

Schwab plans to make the entire tool-kit available in its downloadable desktop solution to the cloud, Keough says: “With our solution, there aren’t any sacrifices. All the tools from the downloadable application will be in our cloud-based solution.”

A key client group that will benefit: Mac fans, who in the past have had to use a Windows emulator to run most of the desktop applications. Quips Keough, “We think our Mac users will be on cloud nine.”

The newest release of StreetSmart Edge, which will be available starting April 19, will include point-and-figure charting, as well as a block-trade indicator, which helps a client know whether large blocks of stock are being traded. Schwab is also adding exchange-traded fund research to the StreetSmart Edge platform itself; currently, you get moved to a built-in Web-browser page in order to view ETF data and screeners.

Keough says that Schwab has a number of clients beta-testing its cloud-based StreetSmart Edge platform. The firm plans a phased roll-out of the remainder of its active- trading client base, beginning April 19. The plan is to contact clients to let them know they are eligible for the new platform, building capacity as client demand grows. Says Keough: “We want to make sure the experience is great as we grow.” She says that clients interested in switching to the new platform earlier can reach out to Schwab’s active-trader support group, and move higher on the list.

NETWORKING FOR THE CHART-CENTRIC: A new global Website, TradingView (tradingview.com), has opened its virtual doors, allowing traders to exchange ideas based on highly interactive, real-time charts. Right now, the site appears to be focused primarily on technical charting, though there are plans to add fundamental data to the mix in the near future. TradingView’s parent company is MultiCharts, which publishes an analytical trading platform that can connect to a wide variety of online brokers.

The current suite of tools available on TradingView is free, and the charts are actually fun to play with. You can look at studies published by other members, and share your own. You can analyze not only a wide variety of stocks, but also foreign-exchange pairs, futures, and indexes. Members are rated; you can find people who are interested in the same items you’re studying, and follow them as you would on Twitter. There’s a short video introduction at youtube/keuJQJEzg5U.

My main fear when I check out social-networking sites for investors and traders is that pump-and-dump schemers will be hanging out, trying to get the naïve trader to buy into a risky stock.

In the time I spent poking around on TradingView, however, those sorts of smooth operators weren’t in evidence. While it’s important to take what a total stranger on the Internet recommends with a very large grain of salt, I also find value in checking over ideas posted by knowledgeable traders. And there are plenty of people with interesting ideas on TradingView. The Website’s features let them illustrate their ideas with actual price and volume data, as well as a wide variety of technical studies. For the price, it’s well worth checking out.

SPEAKING OF PRICING, there are several ways to figure out how much it will cost you to trade if you’re an ING Direct/ShareBuilder client. In Barron’s annual review of online brokers, we said that ShareBuilder (sharebuilder.com) was one of the most expensive places for both occasional and frequent traders. We used the pricing listed for those who opted for the “Basic” program, but the costs would have been lower if we’d used the “Advantage” program instead.

ShareBuilder customers can sign up for the Advantage for $12 a month, which entitles them to 12 commission-free automatic investments, and a $2 per transaction discount on real-time trades. There is also a discount on margin rates. Had we used the Advantage-program pricing, the monthly trading cost for occasional traders would have come out to $102.60, rather than the $104.60 that Barron’s figured in its online-broker review.

The cost differential is much greater for the frequent trader. We calculated $3,420 per month, based on 100 stock and 100 option trades, plus $30,000 in margin debt, which is correct if the customer is a Basic program member. Ponying up the $12 for the Advantage program would drop the cost to $2,530, and put four other brokers out of the other 26 in the story ahead of them in our “Highest Cost” table. However, ShareBuilder’s tools are more suitable for buy-and-hold investors. The ShareBuilder Advantage Program make sense for those who will make more than three automatic investments each month, or eight or more real-time transactions. 

Published in Barron’s, April 9, 2012. 

Why the crunch this year? The 1099-B’s new layout wasn’t made public until November, nor was the requirement to file an additional form to reconcile capital gains, IRS form 8949. Coming so late in the year, these changes have caused consternation for investors—especially frequent traders.

Some Barron’s readers have told us that they’ve already received corrected 1099-B forms—it is the clearing firms’ responsibility to send them to investors—or what they say are incorrect wash-sale calculations. A wash sale occurs when a trader sells a stock at a loss, then buys it back within 30 days. The IRS doesn’t let taxpayers claim write-offs for losses on wash sales.

Green is also urging brokers and investors to persuade the Internal Revenue Service to turn off tax audits based on capital gains for the tax year 2011, since there is a great deal of confusion, and lack of standardization in the industry.

Taxpayers who get a refund based on incorrect data will have to pay it back—with penalties and interest. But the 2011 situation is so messy, Green thinks that CPAs might shun investors with lots of wash sales, rather than deal with increased audits.

Brian Keil, Charles Schwab’s director of cost-basis and tax reporting, says that clients’ 1099-Bs were available online in PDF format Feb. 15, but the delay in mailing the paper forms until a week or so later has resulted in a much lower correction rate than in past years.

YES, THIS YEAR is different. Usually, “the single largest thing that generates corrections” is a restatement of dividends, notes Keil. He adds that interest payments from issuers also get restated, but that the corrections issued this year weren’t typically generated by capital-gains calculations.

Rather, it was the delayed 1099-B/8949 that caused the most investor anxiety. To help keep investors from being rattled by the IRS revisions, Keil says that Schwab (ticker: SCHW) invited all clients who had 2011 wash sales in their brokerage accounts to a Webinar on the topic in January (schwab.com/CBinfo). “We’ve spent a lot of time beefing up our educational opportunities, and we think there is an ongoing need,” he observes.

TD Ameritrade’s (tdameritrade.com) director of tax and retirement-account services, Becky Groves, says her firm has had no data issues related to cost-basis calculations. However, in anticipation of problems with wash-sale reporting, Groves says, “We have established multiple channels of written and electronic educational material to answer client questions, and instituted a specialized support team to assist clients.” She believes TD Ameritrade’s (AMTD) systems, tools, and educational offerings “essentially take the guesswork out of filing a tax return on covered securities.” (tdameritrade.com/costbasisreportingregulation/faq.html)

THE COST-BASIS REPORTING rules have been in discussion for more than five years, but implementation was delayed a year, and confusion reigns because, among other reasons: Your broker can account only for wash sales that took place at their own firms. But say you sell a stock at a loss in your Schwab account, then buy it again two weeks later in your E*Trade account. The computers tracking your Schwab activity haven’t been apprised of the transactions at E*Trade, and so can’t flag the resulting wash sale.

So, should you file for an extension—new deadline, Oct. 15, 2012—as Green recommends? The brokers we asked had mixed responses. Mike Gibbons, Scottrade’s (scottrade.com) senior manager for tax reporting and cost basis, believes that his firm’s customers are in good shape. Gibbons says, “A good rule of thumb would be to wait until the beginning of April to file tax returns this year, as corrections are issued.”

CPA Green’s concerns regarding corrections issued by brokers certainly accounts for a large part of his insistence on filing an extension, but he also points out that the 1099-Bs issued by brokers will rarely match up with the individual taxpayer’s trade accounting net gain or loss. He says, “The IRS gives brokers one set of rules for preparing cost-basis reporting 1099-Bs, then gives taxpayers an entirely different set of rules.” The rules for taxpayers are codified in the new IRS form 8949 for 2011.

Green’s blog contains several entries that detail issues with the new cost-basis calculations. In one, he calls on the brokerage industry to pressure the IRS to avoid auditing taxpayers for a year, due to cost-basis calculations. Several of the brokers we queried about this possibility responded that they would encourage their customers to write to their congressional representatives to request a delay in enforcement. Adds Green: “IRS regulations that are imposed on any industry should allow adequate time to be implemented and tested for accuracy prior to impacting the public.”

Since it’s impossible for a single broker to properly calculate a trader’s wash sales where there are multiple brokers, how can investors cope?

One way is to manually manage all of your transactions across multiple accounts, and make sure you’re not washing away potential capital losses. Sarah Place, CEO of PlaceTrade (placetrade.com), says that it’s not realistic for the brokerage industry to track all trades across all accounts, and that it’s unlikely that traders would be willing to disclose every account and holding to all of their brokers.

Says Place: “Since clients generally prefer their privacy, the burden falls on the industry to perhaps create a system such as DST Vision [used to view mutual funds held by investors] as a basis to start tracking trades across the industry.” But, she continues, creating such a system may not be feasible in the short term, even though it could solve the problem in the long term.

I think it’s smart for those of you who have capital gains or losses reported on a 1099-B to file an extension for your 2011 taxes, given all of the uncertainty. Then, ensure that what you file is correct. Good luck, and be careful out there. 

Published in Barrons, March 26, 2012. 

YOUR FIRST SECURITY MEASURE should be to password-protect your mobile device. The iPhone and iPad can be set up with a four-digit passcode lock, which you should do as soon as you take it out of the box. The passcode can be created so that all the data the device holds, including contacts, text messages, and e-mail login, are erased if someone enters the wrong code 10 times.

What if your devices are safe and sound, but your wi-fi connection isn’t? It’s obvious when your iPad is missing. It’s not so easy to tell when your data transmissions are being intercepted by bad guys. Thieves use such strategies as packet sniffing, phishing, and pharming–all ways of intercepting data or tricking you by spoofing a financial-services Website.

Ever since 2006, when customers of several online brokerages discovered that their passwords had been stolen and their accounts used to inflate the prices of some thinly traded stocks (called “pump and dump” schemes), financial-services firms have made mobile security a high priority.

If you’re conducting any financial business from a mobile device, make sure the firms you’re working with employ encryption for transmitted data, and that they monitor transactions for unusual behavior. Most banks and brokers are now on the lookout for activity that comes from geographical areas that they know are hotbeds of cyber-criminal activity, and have been successful at stopping the great majority of these intrusions.

Even so, mobile-security experts recommend avoiding open wi-fi, and going with EVDO (Evolution Data Optimized, learn more at http://www.evdoinfo.com) or GPRS (General Packet Radio Service). It’s faster, far more secure and not that much more expensive when you realize you won’t be wasting time looking for signal or worrying about what you can and can’t do on the connection.

TO USE EVDO, you just purchase a device from Sprint, Verizon or AT&T and pay a monthly fee for data access. You are your own hot spot when you have one of these, and they work with any mobile device you own, including a laptop. There are some that plug into your tablet’s USB port and others that are battery powered and stand alone. GPRS is built in to many smartphones, and is much more secure than open wi-fi. Your mobile device’s 3G and 4G connections are secure, though they’ll draw on your data usage.

So hang on tight to your mobile devices, and make sure that when you transmit sensitive data that you are doing so safely. If you’re not sure a wi-fi connection is safe, just enjoy the coffee.

Sidebar to Survey of Online Brokers, published in Barron’s Online, March 10, 2012. 

Trading Technology: This category represents the overall workflow for placing an order as well as the order routing technology.

We evaluated the quality of the data available prior to placing an order with an emphasis on streaming real-time data. A real-time quote that is displayed without any additional user input (such as typing the symbol into a separate box or hitting a “Quote” button) receives credit here; if the trader has to make a duplicate entry of the ticker symbol to get a quote, the broker got zero. We checked out the ways a trader is told that an order is executed, such as pop-up notices or an order status screen that is updated when the order fills.

We looked for prefilled order tickets when selling a position, which eliminates possible errors during the closing process. We also evaluated the options order entry process, as well as mutual-fund, bond, and (when available) futures, commodities and foreign-exchange order-entry screens. Methods for placing conditional orders, such as one-cancels-another or one-triggers-another, were checked out.

The availability of price-improvement strategies and smart-order routing technology (which finds the best bid or offer) are necessary to earn top ratings in this category. We asked whether a broker’s order routing engine used a spray or sequential engine; spray routing contacts multiple venues simultaneously and are less inclined to execute orders via routes that offer payment for order flow. Brokers offering price improvement—a sale above the bid price, a buy below the offer—received a fraction of a point depending on the portion of their transactions that benefited.

Top marks were earned by brokers who offered a wide array of order types, including conditional orders, and had spray order routing technology. The ability to place a trade from a graph earned a fraction of a point. In addition, we looked for ways to customize the trading experience, such as setting a default number of shares or contracts, to speed order entry. The order entry-and-execution process must flow easily from one step to the next, with streaming real-time information (including buying power and margin balance) available when needed.

Usability: A 5 here means the site or program was easy to use and well-designed, didn’t bog down when moving from screen to screen, and can be tailored to the user’s needs. We looked at how easy it is to get started on the platform or website as a new customer. Constant availability of a trading ticket, and easy access to research and account status data is key. Being able to easily switch from one area of the website or program to another is important here, as are customization options.

Mobile: A differentiator this year is the availability and quality of mobile trading and account data. We looked for streaming real-time data, including charting and news. We looked for ways to trade stock and options on your tablet or smart phone. Cross-platform integration is key; when you set up a watchlist on your desktop, it should be available on your mobile device as well. We also considered the workflow for placing an order and managing an account. To earn a 5 in this category, a broker must offer the ability to place complex options transactions and conditional orders, and be able to share watchlists and trade ideas with the customer’s desktop or Web-based offering.

Range of Offerings: We awarded points for the diversity of investments that can be traded online, with partial points given for those that can only be traded offline. Since long and short stock-trading, as well as single-leg options orders are now standard, we don’t award points for those transactions. We asked brokers how many stocks, on average, their customers can sell short, and awarded up to a half-point based on their answer. Complex options trading, and the availability of mutual funds, bonds, futures, commodities and international trading were also considered. A 5 in this category means you can execute all of these transactions online.

Research Amenities: This category measures the quality and accessibility of research, quotes and charting. We looked for research, news and charting linked to a customer’s portfolio and watch lists; the quality of third-party research and its integration with the rest of the site; and the availability of screeners, with special emphasis on options-strategy screeners. Brokers also won points for offering real-time streaming quotes at no additional cost, powerful charting capabilities, and Level II quotes. Partial credit was awarded for features that generated an extra fee.

Portfolio Analysis and Reports: The emphasis here is on clearly laid-out reports, updated in real time, showing current balances, positions and margin status. Portfolio-analysis reports, with links to news and research, as well as extensive transaction history, are most desirable. Tax reporting also falls in this category. Full credit is given for reports that can be created on the broker’s website, with no additional fees or data entry required. Partial credit is awarded to brokers that populate services such as GainsKeeper and Maxit (tax analysis and reporting programs) for an additional fee.

Customer Service and Education: We sized up online help such as live-chat capability, user guides and frequently-asked-question files. Offline help was assessed by making calls to customer service, and weighing the brokers’ reports of the average time spent on hold when a customer calls in. We took a look at the education offerings, both online and live. The ability to visit a broker in person, and to access the account via a mobile device, is taken into account here.

Costs: We looked at commissions for stock and options trades and margin interest rates, giving more points for lower costs. We scaled the points awarded so that the lowest costs in the group earned the maximum number of points, with fractions (and occasional zeros) given to the more expensive brokers. Stock and options commissions are the biggest factor here, but mutual-fund and other transaction fees are also considered. A 5 could be earned here by very low stock and mutual-fund commissions, $4 or less for 10 options contracts, margin interest rates below 2%, and no account-maintenance fees.

Sidebar to Survey of Online Brokers, published in Barron’s Online, March 10, 2012. 

We’ve seen mobile apps use the built-in smartphone camera for depositing checks; now the camera can also be used to help generate trading ideas. The quote detail generated by Snapstock contains links that allow you to put the stock on a watch list, or place a trade. You can also check out recent news, examine a chart, or delve into options chains.

This feature lets you think about trading while you’re shopping for items for dinner, a cold remedy, or a new pair of shoes. It could make that next trip to the mall much more interesting.

THERE’S A NEWCOMER to the list of online brokers: Kapitall Generation (http://www.kapitall.com) opened its virtual doors to the public in late January, bringing a unique look and feel to investing. The site offers a game-like view of investing, with all activity taking place on what the founders call “the playground.” CEO Gaspard de Dreuzy is a veteran of game production and development while creative director Cordell Ratzlaff spent time at Apple leading its Human Interface Group. So their front end looks very little like other online brokerage sites and services we’ve been reviewing for the past two decades.

De Dreuzy says, “We believe that all existing online brokers are very focused on the more sophisticated and mature online traders, but the rest of us need a brokerage platform like Kapitall that delivers a superior user experience.” He likens the Kapitall platform to the Sony Wii, which was a less powerful gaming system than others but transformed the industry due to its ease of use. “We are trying to be the Wii and iPhone of investing,” de Dreuzy notes.

We must, however, admit to a negative reaction to the name of the newly-launched online broker. Ratzlaff says that the name was a place-holder during the site’s build-out phase, but it seems to have stuck. We’re not sure what something that conjures Karl Marx’s “Das Kapital” has to do with capitalistic investing and trading. But we digress.

The site was launched as a Web application to help investors explore their ideas, but recently became a broker/dealer and attached a trade execution engine to its front-end. Currently you can only buy and sell stocks in a cash account at Kapitall, but there are plans to add trading on margin and options transactions later in the year. There are also plans to roll out an iPad app by summer. It’s now in beta test.

When you first log in, you go through a quick questionnaire intended to customize the experience based on your interests and amount of investing experience. The Playground is then displayed, which includes a practice portfolio with $5,000 in virtual money. Rather than seeing menu items and a lot of data, you see a collection of icons that represent your practice portfolio and stocks that might interest you. You organize your experience by dragging and dropping the icons, which could represent individual stocks, groups of stocks, or a portfolio.

These tile-like icons are color-coded based on the industry (blue for high tech, for instance) and are festooned with the corporate logo. On the left side is a palette that can be opened with tools that help you study the stocks on your Playground. The Compar-o-Matic lets you look at fundamental data in visually-arresting way, showing changes in value with an animated graph.

Another tool is the Number Cruncher, which lets you dig into fundamental financial data and SEC filings while it explains underlying concepts in English. As you use the various tools on the site, you generate points, and you “level up” just like in a video game. As you level up, you get access to more tools and additional virtual cash for your practice portfolio.

We can see this broker appealing to younger investors who are familiar with the video-game paradigm, yet uncomfortable with the traditional number-heavy online brokers. Kapitall is also plugged into Twitter, with a stream of tweets scrolling on the bottom of the screen that pertain to the stocks you’ve got on your Playground. The Mini-Map that pops out on the right side of the screen shows you where all your icons are scattered around the Playground; you can use that to scroll from screen to screen.

You can join the site for free and use the tools and a practice portfolio without opening an account, and it would be worth it just to play with the interface. You get real-time quotes, supplied by BATS; if you do sign up for and fund an account by the end of March, you’ll pay $5 per stock transaction for the life of the account. Commissions are $9.95 per trade otherwise. Karl would be intrigued.

Published in Barron’s Online, February 25, 2012. 

THE NEW CROSS-BORDER VENUES are: Mexico, New Zealand, Singapore, Sweden and Switzerland, along with their associated currencies. That’s in addition to Australia, Canada, Hong Kong, Japan, Norway, the U.K., and six European countries: Belgium, France, Germany, Italy, the Netherlands and Portugal. And customers can now trade in 13 foreign currencies.

Jim Burton, president of Fidelity’s brokerage services, says of the expanded offerings, “I like to think of this as proof of our commitment to continuing to make user-friendly services available to people.”

Burton thinks that, in general, most investors should have 30% of their stock portfolio in international equities, in order to benefit from diversification and tap into growth advantages.

There are a number of ways to attain that 30%, such as exchange-traded funds (ETFs), mutual funds, and American depositary receipts (ADRs).

ETFs and mutual funds are, by far, the easiest ways to get into international markets. Many ETFs have the advantage of being optionable as well, allowing the investor to generate additional income through covered calls, among other strategies.

Access to ADRs can get tricky; although approximately 1,500 international firms have ADRs available for trading—mostly over the counter—not all brokerages allow access to all of them.

We’ve seen online brokers expand their international-trading capabilities significantly in the past few years. Interactive Brokers, which focuses on very active traders only, was the first major online retail broker to let its customers trade internationally, and still has the widest range of international offerings http://www.interactivebrokers.com).

Fidelity customers who hold non-retirement brokerage accounts can check out the international trading details by selecting “Accounts & Trade” on the top-level home-page menu, then click “International Trading” to see the offerings displayed. Click those you’re interested in, and you should get a message saying that your account is ready for international trading. Fidelity does require that you chat with one of its international trading specialists prior to placing your first international stock-trade or currency-exchange order, to see if you’ve understood the educational information on international trading and are aware of the risks.

So, once the switch is flipped, you can trade straight through to any of the 17 marketplaces, in either the local currency or in dollars.

If you prefer to use the local currency, Burton says you have a number of choices in foreign exchange. For example: If you want to trade on Mexico’s bourse, but you hold only dollars, you can convert some to pesos (fees are sliding-scale, and lower-percentage for bigger transactions) to make the trades, or just to hold the currency. Or if you want to buy one or two positions and don’t want to hold excess foreign currency, you can hold the position in dollars. When you exit the position, you can exit to dollars or hold pesos.

Fidelity’s international trading platform also lets you hold foreign currencies—even if you don’t trade in those markets. Unlike many forex brokerages, however, Fidelity doesn’t allow the use of leverage. That reduces your risk considerably—but also can dampen your gains. Says Fidelity’s Burton: “What you’re paying [for foreign-exchange transactions] is basically a fee, which we think is very reasonable, on top of the interbank rate.”

Costs range from about $14 to $40 per trade, net of currency exchange, depending on the market. Burton notes, “There’s a lot of plumbing here, so $14 to $40 is very reasonable, I think, for all the work to execute and settle a trade.” To keep trading costs down, he recommends limiting your number of currency conversions.

You’ll find a great deal of information about Fidelity’s international offering at http://www.fidelity.com/internationaltrading.

Bon voyage!

WE’VE SEEN LOTS OF INNOVATION from Barron’s 2011 online-broker survey winner, TradeStation (http://www.tradestation.com). And many of its new offerings appear to be aimed at the mainstream trading market.

We’ve long thought of TradeStation as a great place for very frequent traders to back-test their strategies on its huge database. Now, TradeStation is aiming to bring less-experienced traders into the fold without abandoning the needs of the established customer base. These projects include a first-time user’s walk-through on their recently (and now, seamlessly) redesigned Website, and one-on-one sessions with customer-service representatives who will help newbies use its extensive tool kit.

Another area where TradeStation has improved its offerings is in portfolio reporting. After acquiring the technology from Rina Systems in 2010, a new feature called Portfolio Maestro—a portfolio-testing and optimization tool—was launched. Portfolio Maestro considers the overall performance of all of your holdings across asset classes, and offers risk assessment and optimization to help you improve your game.

Most trading-strategy optimizers consider a single item at a time, such as a stock, an options strategy or a forex pair. Portfolio Maestro considers portfolio-wide constraints, such as funds committed to other investments, to help protect profits and limit downside risk. The resulting reports can be viewed in a variety of tabular or graphical formats. The goal of acquiring Portfolio Maestro and incorporating it into the TradeStation platform was to offer traders a realistic and complete perspective on their portfolios. It’s worth a look.

Published in Barron’s, February 6, 2012. 

The depositor simply uses the iPhone’s camera to photograph the front and back of a paper check. Then, she launches E*Trade Mobile Pro, available in Apple’s App Store, enters the amount of the check and uploads the images. The funds are made available in one or two days. You are advised to hang onto the check for a few days until you get a message from E*Trade (http://www.etrade.com) verifying the deposit. Don’t despair, Android users—E*Trade plans to give you mobile deposit capability during the early part of 2012.

THE E*TRADE APP, and others like it, owe their existence to changes in banking rules passed back in 2003 that allowed electronic processing at banks. The technology has caught up, which is why bank ATMs have begun to process checks without requiring envelopes or deposit slips. No more hunting for a pen. (You can learn more about the details at http://www.federalreserve.gov/paymentsystems/check21_faq.htm. It’s interesting reading. Really.)

Other changes are afoot at E*Trade. Freiberg says it plans to expand its market-making business, providing liquidity in certain stocks. The market-making business also puts E*Trade in the position of buying stock from, and selling stock to, its own customers. The price of the transaction must be at the national best bid or offer; market makers generate revenue through the difference between the bid and offer.

One thing E*Trade won’t be doing any time soon is selling itself, says Freiberg. He and the E*Trade board have been under pressure to improve shareholder value from big investors like hedge fund Citadel. E*Trade shares, adjusted for a reverse split, have fallen from a high of $277.60 in 2006 to $9.50 last week. Freiberg assures us that a sale is off the table for now. The Electronic Investor would love to see E*Trade solve its substantial problems with better trading and investment products. A better Website would be a good first step, albeit a small one.

WE’VE LONG CRITICIZED Interactive Brokers (http://www.interactivebrokers.com) for the paucity of its electronic-research amenities and portfolio analysis. The firm has made several improvements.

IB has launched IBIS, the Interactive Brokers Information System, which can be accessed from within its trading application, or as a stand-alone package. The Research Platform supplies real-time quotes, stock scanners, charts and alerts, risk analytics for your stock portfolio, as well as IB’s Daily Options Brief. For more power, add the Research Data Bundle or select individual subscriptions to Reuters Fundamentals, Reuters StreetEvents Calendars, Dow Jones Real Time News, Reuters Global Newswire or Dow Jones News Service.

IB customers who are active traders pay $39 a month for the basic bundle of services; more news and data feeds can be added as desired. (See ibis.interactivebrokers.com/ibis/pricing.php for pricing information.)

The electronic broker’s PortfolioAnalyst provides tools that show you what’s happening to your trades. The Attribution Report compares an account’s return to a selected index, such as the Standard & Poor’s 500, and explains the difference due to variations in sector ratings and returns within each sector. Many mutual-fund managers use a similar report to gauge performance.

Other features allow you to drill down into your portfolio’s risk factors, or analyze net performance over a specific period. The sector-allocation report displays a color-coded bar chart and table that illustrate the net asset value of stocks and options in your portfolio by sector for any day, month or quarter you choose.

Advisors and brokers who use IB as the trading platform for customer portfolios can set up client reports to be printed in a batch for easy distribution. These new reporting capabilities are extremely powerful, and very informative.

JUST2TRADE (http://www.just2trade.com), which recently updated its services ("Fidelity Polishes Its iPad App,” Dec. 5, 2011), has added bond trading, one of investors’ major sources of profit in the past few years. Powered by Knight BondPoint, which supplies bond-trading capabilities for several online brokers, Just2Trade allows customers to execute bond trades online for $2.50 per transaction. You can trade municipals, corporates, agencies, collateralized mortgage obligations and strips or zero-coupon bonds.

You get there by choosing Fixed Income Center from the Trading tab on the site’s main page. There isn’t (yet) a link to fixed-income research under the Research tab, but the landing page provides data about current offerings such as yield grids and current interest rates.

The search functions of the bond platform aren’t pretty, but they’re presented in a familiar layout. They allow access to new issues, and let investors set up a bond ladder. You’ll find detailed information on both primary and secondary fixed-income securities, including price, yield, maturity, credit ratings, and call protection. You can search the database of available bonds on any of those fields to find securities that will work in your portfolio, and save a search query for future use. Search results can be exported to Excel for further analysis. 

Published in Barron’s, January 23, 2012. 

Stock and ETF screeners have also been spruced up. Screener Plus allows you to use its built-in screens, or customize and save your own. You can combine technical indicators as well as fundamental data, selecting from over 140 variables. The ETF screener is a separate program from Screener Plus, and is based on the tool available to all Schwab customers. It’s now integrated into StreetSmart Edge in a built-in browser window; previously, you had to log into the Schwab Website to use the ETF screener.

The momentum tool offers interesting information, tracking the ratio of upticks to downticks for a stock’s quotes. If a score is calculated to be -2%, it’s saying there are 2% more downticks than upticks during the period. You can customize time periods; it defaults to one minute but you can go as high as 60 minutes. Keough advises clients to set up watchlists that separate highly volatile stocks from less volatile holdings and to monitor the momentum shifts with this tool.

Your StreetSmart Edge layouts are stored on your local computer, but you can also leave them on Schwab’s servers to make it easy to access the program from different computers. Right now it’s a Windows program that runs on Macs with the appropriate emulator, but Schwab is working on a native Macintosh application that it expects to release some time during 2012.

TD AMERITRADE (http://www.tdameritrade.com) launched a new release of its thinkorswim-developed Trade Architect platform in mid-December, as well. Trade Architect is a bridge program that helps an emerging active trader transit from the basic TD Ameritrade Website to all the bells and whistles of the thinkorswim platform.

Third-party research has been integrated into the Trade Architect platform, and the investing social network myTrade has also been folded in. MyTrade allows participants to share ideas, trades, charts and other ideas in a secure environment. Trade Architect’s profit-and-loss graphs can be quickly attached to a note, and if you see an idea that you like posted by another participant, clicking on a “copy” button pre-fills an order entry ticket with the particulars of that trade.

A stock screener was added to Trade Architect so that it now has 25 built-in factors, and the company plans to expand that to 80. The screens can’t be customized; Steve Quirk, senior vice president at TD Ameritrade’s Trader Group, says, “When clients need greater customization, they graduate to the full thinkorswim platform.”

One other change: the CNBC video feed no longer automatically starts when you launch the platform. Customers who were trying to access their account quietly didn’t want the video giving them away. So now you have to press a button to watch the feed.

THE THINKORSWIM PLATFORM IS also being transformed, starting with the home page that’s displayed upon login. It’s a much softer look than before, with two tickers that roll live news headlines and prices. You can find shortcut buttons that get you to any part of the application, such as Alerts, Charts and Trades, at the bottom of the screen.

Futures calendar spreads, a relatively rare feature, have been built into the new thinkorswim. Most futures trades take place one leg at a time, so the ability to create and trade a spread with multiple legs is of note. Pairs trading, which allows you to trade multiple futures contracts simultaneously, is also now built in. The firm has made futures transactions seamless again, following the hiccup that occurred when thinkorswim’s clearing operations were folded into TD Ameritrade’s clearing in August.

One terrific feature of the new platform is the real-time market-scanning tool, which monitors the markets for specific technical events like breakouts and moving-average crossovers on a tick-by-tick basis. The scans run very quickly, which Quirk credits to the horsepower provided by Ameritrade.

A LITTLE TOO PERSONAL CAPITAL: We heard from a reader who had started to use Personal Capital (http://www.personalcapital.com) after our story about the new service ("Intuit Chief Launches Finance Site,” Sept. 26, 2011). However, the reader had several foreign stocks that the Personal Capital identification engine couldn’t handle, so he decided to shut down the account. After some communication woes, the reader contacted The Electronic Investor over worries that his data remained on the firm’s servers.

Jay Shah, the company’s chief information officer, said the reader’s account was deleted within hours of his request, but somehow e-mails informing him got stuck in the ether. Shah explains that Personal Capital, as a registered investment advisor, must keep some data per SEC mandates, but any links to financial accounts are removed. The firm is required to maintain basic demographic information, such as a former customer’s name and address, as well as a summary of any advice they may have presented during their relationship with the client. “For account data, we apply the highest level of sensitivity and security. Nobody in the company has access to that information—it’s encrypted, locked away, and we’ve swallowed the key,” Shah says. He also assures us that Personal Capital’s improved identification engine is having fewer problems recognizing foreign stocks as well as options contracts.

IT’S THAT TIME OF YEAR AGAIN, as we gear up for our 17th annual review of online brokers. What feature or service could a brokerage offer that would entice you to sign up? What kind of research are you finding most useful in these volatile markets? Let us know at electronicinvestor@yahoo.com . 

Published in Barrons, January 2, 2012. 

“There will be a lot of questions this year because the 1099 will look really different, and not every security type is reported. Schedule D will look different, too,” says Cameron Routh, senior vice president, strategic products at Scivantage (scivantage.com), which publishes Maxit, a leading tax-management software package that many online brokers and their clients use. He worries that brokers have squandered an opportunity to educate customers effectively about the cost-basis reporting conundrum. “Investors may come up with a different cost basis number than the firm did. It will be confusing, for sure.”

The key change is that brokers will now have to report not just the total proceeds from a sale as they have in the past but also the amount paid for it.

Don’t blame us if you haven’t heard about this change. We’ve been talking about it virtually nonstop in the past year. In July we discussed a report issued by the consulting firm Celent, entitled, “Cost Basis Reporting: Where Are We Now?,” that detailed many concerns. ("Clearing Up Cost-Basis Confusion,” Barron’s, July 11.) The Celent report warned that “…firms are likely to experience an influx of inquiries from clients. Questions may include why some security types are showing [up], but others are not (as a result of later compliance dates for different securities).” Routh expects that brokers’ phone lines will be jammed on Feb. 15 when all those investors who have not been paying attention to the new rules are suddenly confronted with new forms.

Routh also is concerned that many brokers will have to issue corrected 1099-Bs because of wash sales. A wash sale occurs when a trader sells a stock at a loss, then buys it back within 30 days; you can’t write the loss off under that scenario. If an investor sells a stock in late December for a loss, then buys it back again before 30 days have passed, it’s highly likely that the 1099-B form that must be received by Feb. 15 will be incorrect. You can avoid this problem by delaying the repurchase of a stock you sold for a loss in December until you’re outside the wash-sale window, a 61-day period including the date of the trade plus the 30 days before and after.

Because the cost-basis reporting requirements are being phased in over several years, Routh believes it will be five years before the process becomes smooth. In 2012 brokers will have to report cost-basis data for mutual funds, while the 2013 tax year will bring options and fixed-income transactions into the mix. Routh says, “At that point, who knows? The IRS may think of something else to add.”

GOING BEYOND THE COST-BASIS issue, Routh also shared two other year-end tax tips for traders: Avoid creating a short-term gain if you’ve only got a few days to go before a gain would be considered long-term. Any investment held for less than one year is considered a short-term investment, and is subject to your marginal tax rate rather than the 15% capital gains tax. In addition, delay a sale for a large gain from the end of December into the first week of January so that the tax bill on that gain gets pushed off into 2013.

We’ve heard from the main consumer-software tax-preparation programs about their 2011 products, and we’re disappointed that they’ve paid very little attention to improving the preparation of Schedule D for capital gains and losses. Even more disappointing, nothing has been done to help options traders yet. If you are entering options transactions on either Intuit’s TurboTax (turbotax.com) or H&R Block At Home (hrblock.com), you have to take an extra step to locate the options input screen because it is hidden under “Other Investments.” Apparently these publishers aren’t aware of the huge numbers of options transactions that are taking place or of the explosive growth in the number of options traders.

There is no easy method of manually entering options-transaction data into either of these popular programs. If you only make a few options trades a year, that’s no big deal, but I imagine that the heavy options trader, who makes multi-leg trades, would be willing to pay a bit extra for an Options Edition. Right now the only program that helps generate a Schedule D for the heavy trader is Armen Comp’s TradeLog (http://www.tradelogsoftware.com). A one-year subscription ranges from $69 to $349, depending on the number of transactions you’re entering.

MOBILE APP UPDATE from optionsXpress: David Fisher, the president of optionsXpress, reports that trades placed via mobile devices have grown by more than 40% in the past year. As a result, the firm has launched an iPad app as well as a Website designed to be used by browser-equipped mobile devices, which can be found at http://www.oxwow.com.

I appreciate that the optionsXpress mobile apps feature streaming quotes for all users. Quite a few other brokers make streaming quotes available only to those who qualify based on trading volume or size of account. The iPad app incorporates the Website’s Dragon screener, which lets you search for gainers, losers and major volume movers. You can switch between accounts quickly and access global-market data and news.

The trade ticket is a mobile version of the Website’s All-in-One order-entry system and is easy to navigate. You get access to complete options chains, including the ability to place multi-leg trades.

The mobile browser page is a little clumsy to navigate, but it’s designed for devices that don’t have native apps available. You can find native apps for iPhone, Android devices, BlackBerry and Windows phones at m.optionsxpress.com.

Published in Barron’s, December 19, 2011

“Given the rapid adoption of tablet computing in the last year and a half, it became especially important for Fidelity to extend its leadership position by evolving our iPad app to take full advantage of this mobile platform,” says Richard Blunck, executive vice president of digital distribution.

Available for free from Apple’s app store, the application launches with a map that shows market movements around the globe. Qualified frequent traders—those trading 120 times or more in the previous 12 months–can access real-time streaming quotes from the iPad app; those who aren’t eligible must refresh the page to get updated quotes.

NEWS STORIES, supplied by Thomson Reuters, Barron’s sister news provider MarketWatch, Kiplinger, CNNMoney.com and TheStreet.com, display on the main news page, and are also linked to watchlists and account positions. There is some video content available, along with pre-opening and post-closing news, also provided by Thomson Reuters. You can add your favorite financial news feeds to the Fidelity app as well. The latter is a nice feature that benefits the big investment company by keeping you on the application, with its trading buttons within easy reach.

Fidelity’s charting feature is elegant, though others go a lot further (and are considerably more expensive) on the iPad. You can view up to three charts on a single screen, and add technical indicators from a limited list. Third-party research content, including the Bull and Bear of the Day from Zacks Investment Research, Recognia AlertWire, and other sources are available. In addition, the day’s most heavily traded stocks by Fidelity customers can be displayed.

You can view a demo of the updated iPad app by checking out the video at http://www.fidelity.com/newapp.

SHIFTING OVER TO YOUR DESKTOP computer, Fidelity introduced two professional-grade trading algorithms to its downloadable software platform, Active Trader Pro. Customers are eligible to use Active Trader Pro if they’ve traded at least 36 times in the previous 12 months; they can get the algorithms with 120 trades. These algorithms, Volume Weighted Average Price (VWAP) and Target Volume (TVOL), automatically enter orders for you based on a specific set of instructions. These tools are typically not available to retail traders other than at online brokers like Interactive Brokers (http://www.interactivebrokers.com), which cater to very active traders.

“Algorithms are computer programs that execute large orders over time with the goal of optimizing execution costs and managing risk,” explains Derrick Chan, vice president of financial engineering and electronic trading at Fidelity. “These trading strategies, coupled with Fidelity’s expansive liquidity network, can be useful for larger orders which might otherwise experience significant market impact if they were submitted to the market all at once,” he adds.

The VWAP strategy is designed to get you the average volume-weighted price from the time you enter your order to the end of the trading day. One way to think of it is dollar-cost averaging over a short period. The TVOL algorithm is similar, but traders have more control over the pace at which their order is executed by allowing them to choose a target participation rate of 5%, 10% or 20% of volume in a given stock over a period of time. They can switch off the algorithm at any time.

Obviously, these are trading strategies designed for very large blocks of stock. Though VWAP and TVOL execute trades in multiple steps, Fidelity charges a single $7.95 commission.

Fidelity supplied us with some interesting price improvement statistics. They showed that approximately 80% of 1,000-share orders entered between January and September 2011 were executed at a price better than the national best bid or offer (NBBO), with an average savings per order of $3.62. That’s an impressive chunk of change. The industry average price improvement was 34 cents for a 1,000-share order during that same stretch.

JUST2TRADE (http://www.just2trade.com), which prides itself on its rock-bottom $2.50 commissions, has updated its platform with streaming charts and complex options-trading tools.

Launched in October, the streaming charts can be found under the research tab if you select “Tick” as the time period. You can create up to five charts, using a tab in the charting window, and compare as many as three symbols in each. Your watchlist and portfolio positions display on the side bar; you can quickly add one of those symbols to a chart just by clicking on a check box.

More than 60 technical indicators can be included in any chart, and a variety of drawing tools are available. Of note is the ability to enter an order from a chart; if you right-click, an order ticket opens up, pre-populated with the selected price.

Complex options, which launched in June, allow you to select and trade contracts with up to four legs. Options trades are $2.50, plus 50 cents per contract. There also are options pricing and probability tools, supplied by iVolatility. They’re useful when deciding which option contracts to trade.

Is the expanded functionality a prelude to higher commissions? CEO Fuad Ahmed insists that it’s not. Just2Trade isn’t “thinking of raising our prices. That’s not up for discussion. Our pricing is $2.50, and will stay $2.50.”

Published in Barron’s, December 5, 2011. 

OptionStation Pro is launched from an icon on the main TradeStation tool bar. One way to get started is to bring up a quote panel for a particular stock and its associated options contracts. The quote screen is easily customized, and the expiration countdown displays not only days to expiration but also hours and minutes. The latter is important for options close to expiration, and the countdown is built into the calculations for all the different trading parameters, better known as “the Greeks,” that you use, as well as each spread you might create. Using more precise dates in the calculations will give you better results for time-based research, as well as for probability analysis.

You’ll find a drop-down box that lists 16 of the most common spread types, such as butterflies and condors. Choose one and you’ll see a variety of possible spreads you can buy. Here’s where OptionStation Pro really turns it on.

Using check boxes, you can pick all the displayed spreads that you’d like to analyze further. If you use the two-dimensional risk graph, you’ll see the value of each spread over time, which is displayed with a probability calculator that shows which of the strategies is most likely to turn you a profit. Other platforms have probability calculators for options strategies, but TradeStation’s implementation is fascinating.

You can also use a tool called price slices, which allows you to make assumptions about the potential future value of the underlying stock and perform a sensitivity analysis. Another tool you can use is a 3D graph, which shows the landscape of profit-and-loss values over the lifetime of a spread.

Since this is all part of the firm’s downloadable platform, the myriad calculations take place on your computer, and the analysis is done as quickly as your hardware permits. We checked out OptionStation Pro on a relatively new Windows-based notebook, which was hooked up to a large-screen high-definition, or HD, TV for the display. Rendering the 2D and 3D graphs was accomplished very quickly, and the real-time Greeks displayed promptly as well.

Placing a trade through OptionStation Pro is accomplished with a single click. The prepopulated order ticket is created; once an order is sent, you can use the graphs in the platform to track the value of your trade in real time. All of this analysis, trading and tracking is done on a single screen that can be easily customized to your needs.

TradeStation promises more upgrades. Though the firm charges $99.95 per month for the platform, it’s free once certain minimums are met (5,000 shares traded, or 50 options contracts). “If you’re serious about trading, you will meet our minimums quickly, and the platform is free,” says vice president of strategic relations Janette Perez.

WEB-BASED TRADEMONSTER (http://www.trademonster.com) has improved its setup with three new tools: performance management, cost-basis adjustment, and portfolio-management tracking and assessment. It’s all integrated into the firm’s platform, which is free to customers.

Launched in September, the performance-management piece allows an options trader to create custom strategies and see related performance data. This feature also allows you to add hypothetical legs to an options strategy that you already have in place to create synthetic trades.

Aric Forsythe, vice president of product management at tradeMonster, explains that many customers use a variety of strategies on a single underlying stock that could overlap. For instance, you might have a calendar spread in place, and shortly thereafter set up a vertical-cal spread on the same stock. The new tradeMonster system would identify the second trade, and account for its effect on the first options position. But it would also allow you to define and track each strategy so that the calendar and vertical-call spreads would be seen separately. “This gives the customer the flexibility to manage what he wants, in the way that he wants,” Forsythe says.

The second new piece is cost-basis adjustment, which will come in handy for those who roll options positions. For example, a covered-call writer might want to see how this strategy is reducing his cost basis in the underlying stock over time. You can also adjust your cost basis when a dividend is issued. There’s a filtering mechanism that makes it easy to select the appropriate transactions, simplifying what could be a tedious manual process.

The third piece builds on tradeMonster’s Trade Journal by allowing clients to tag transactions with custom titles. For instance, if you’re following a particular newsletter writer, or if you see a recommendation in Barron’s that you like, you can tag each trade appropriately. Then when you run analytical reports in the future, you can sort and generate performance statistics on those tags.

The assessment analysis you generate can also be viewed graphically, and the data can be filtered by tags, dates and symbols, among other items. “These features replace a lot of manual spreadsheet work that traders end up doing,” says Forsythe.

These performance analyses are for your own purposes, and don’t map directly to the reports the IRS will see. The intent is to provide you with a way to audit yourself and come up with answers to questions like: How am I doing when I write calendar spreads versus iron condors? Am I more successful when trading certain ETFs or particular stocks? Are some newsletters steering me toward more profitable trades than others?

It’s good stuff to know.

Published in Barron’s, November 21, 2011

Recognizing the growing importance of options trading to its customer base, E*Trade (http://www.etrade.com) has just added four new options-analysis tools to its Website and its downloadable software platform, E*Trade Pro.

One of these tools, the Options Screener, fills a major gap in E*Trade’s options research lineup, and should prove extremely useful.

Though a little late to the options- screening party, E*Trade’s new tools are well designed, and should provide customers with trading ideas and excellent analytics. The firm has also added educational programs based on the tools. Senior Vice President Chris Larkin claims that “This suite of tools can be used by a wide range of customers, from beginning options traders to the very advanced.”

Larkin says options accounted for nearly 20% of daily average retail trades at E*Trade during the second quarter, and the firm’s clients have embraced the product. “Within the last year, we’ve seen every type of market—bear, bull, and highly volatile—so showcasing options-trading has helped drive the market,” says Larkin. The four new tools are accessible from E*Trade’s Options Tools’ menu. The first three help guide you when you know the underlying stock you want to analyze.

The Strategy Optimizer helps you figure out which options strategies make the most sense, taking into account your estimate of a target stock’s price, time horizon and market outlook (bullish, bearish, neutral), and the amount you want to invest. The Options Analyzer considers your existing holdings and graphically leads you through a series of what-if scenarios, plotting out your potential profit or loss. The Probability Calculator makes extensive use of E*Trade’s historical volatility database to calculate whether a contract will close inside (or outside) a particular price range.

The Strategy Optimizer asks you to fill in four parameters—target price, expiration date, volatility and investment amount—and then generates a table of results for you to consider. You can use a series of slider bars to adjust these parameters, or just type your estimates in directly. The top three results, ranked by potential profit, are presented in detail, while the remaining contracts can be expanded if you’d like to see more information. You can take one of the strategies and run it through the Options Analyzer, which shows the profit and loss in a graphical format. To get an idea of how a strategy is predicted to work out at expiration, you can look at it in the Probability Calculator. Then, if you want to trade the strategy, clicking on the “Trade” button generates a trade ticket.

The fourth tool, the Options Screener, looks at the entire market, in real time, and lets you filter for contracts based on the current environment. There are 19 built-in screens that let you view, for example, unusually high call volume and puts with high time premiums. You can build your own screen, or tweak the ones already in place to meet your own specifications.

Larkin says customer feedback is guiding the refinement of these tools. In the near future, based on an investor’s request, you will be able to filter out ETFs from the screener results, for example. “We’ve gotten a lot of good feedback from our beta-testers, and we’re tweaking the tools as quickly as we can,” Larkin says.

Though E*Trade definitely isn’t the first online broker to make screeners and scanners available, it’s done a nice job with the design and implementation. Better late than never.

TRADE FREE FOR LIFE AT TRADESTATION: The well-regarded firm (http://www.tradestation.com) has created a contest that will give the winner a commission-free futures or equities brokerage account. Through Nov. 20, TradeStation invites the public to dream up ways to use its EasyLanguage programming environment to analyze and trade financial markets. You must be a U.S. resident over 21 years of age to enter, but you don’t have to know how to use EasyLanguage to participate.

The contest challenges entrants to come up with an idea that can be implemented on TradeStation’s platform—it could be a strategy, an indicator or an analysis tool. The winning suggestion will be brought to life on the trading platform, and its creator can trade commission-free for life in one account. Enter at http://www.tradestation.com/tradefreeforlife, or on TradeStation’s Facebook page.

PROMOTING FINANCIAL LITERACY: A new Website, FraudAvengers (http://www.fraudavengers.org) was launched in mid-October with the goal of educating the public on how crooks use online-payment options and technologies to commit fraud.

The site was created by the Foundation for Payments Fraud Abatement and Activism, a Texas-based nonprofit corporation with the slogan, “Pros preventing cons.”

The site contains blog articles contributed by industry experts who want to inform individuals and small businesses on how to reduce their personal risk of fraud. Founder Robin Slade says, “We are confident that informed individuals can be a major force in fighting fraud.” Its purpose is to provide dynamic, up-to-date information that empowers consumers to protect their financial well-being.

That’s a laudable goal, and a community worth joining. 

Published in Barron’s, October 31, 2011.