Index | Recent Threads | Who's Online | Search

New Thread
This topic has been viewed 187 times and has 3 replies
jmh
Live Books seem to leave a lot of cash on the table (circa 3% to 3.5% of the value of the book)

Hi P123,

If you look at the books (1574489) or (1431387), they seem to leave a lot of cash on the table.
I have other books made from the same two strategies and they all leave a significant amount of cash on the table e.g. $7.2k on a $250k book which is significant (circa 3% to 3.5% of the value of the book)

Strategies are: 1574307 & 1431260

There no obvious reasons for this and I did not notice it in the past 4 years which lead me to think that this is new (usually would leave $50 cash or so).
- Cost and slippage are set to 0 for both underlying strategies
- Books are on variable slippage and 0.04% transaction costs. The T-costs seem to have come out all right today (see another post and email exchange with Ted)

Many thanks in advance,

Jerome

Jun 10, 2019 1:43:18 PM       
Edit 1 times, last edit by jmh at Jun 10, 2019 4:08:03 PM
yuvaltaylor
Re: Live Books seem to leave a lot of cash on the table (circa 3% to 3.5% of the value of the book)

We're looking into this.

Yuval Taylor
Product Manager, Portfolio123
invest(igations)
Any opinions or recommendations in this message are not opinions or recommendations of Portfolio123 Securities LLC.

Jun 11, 2019 3:56:12 PM       
Edit 2 times, last edit by yuvaltaylor at Jun 11, 2019 4:37:35 PM
yuvaltaylor
Re: Live Books seem to leave a lot of cash on the table (circa 3% to 3.5% of the value of the book)

The excess cash is due to the inability of books to buy fractional shares.

To simplify things, let's say you had two strategies, one of which bought only AAPL ($195.59) and the other of which bought only GOOGL ($1,094.61). Let's say each strategy started out with $50,000. Strategy A would leave $124.55 on the table and strategy B would leave $742.55 on the table. The total cash would be $867.10, or 0.87%. Now let's say you started a book with $50,000 cash that combined those two strategies. Since the amount in the book is significantly less than the amount in the two simulations combined, you'd get significantly more cash (percentage-wise) in the book than in the two strategies. To be precise, you'd get $160.07 + $918.58 = $1,078.65, or 2.16%.

I hope this makes sense! If not, let me know.

Yuval Taylor
Product Manager, Portfolio123
invest(igations)
Any opinions or recommendations in this message are not opinions or recommendations of Portfolio123 Securities LLC.

Jun 13, 2019 10:54:17 AM       
jmh
Re: Live Books seem to leave a lot of cash on the table (circa 3% to 3.5% of the value of the book)

Thank you Yuval. I understand and the maths check out.

Indeed, if the book in your example was $200k, it would only be 0.22% left in cash (instead of 2.16% with a $50k book).
In general the larger the book, the less issues like this.

The annoying bit is that this process creates a gap from book simulations (which trade the equity curve of the underlying strategies) and, over time, it can lead to differing results... Not much can be done about it.

I assume fractional shares for books are not on the to-do list?

Jerome

Jun 15, 2019 3:24:49 PM