OmniVest User Forums
General Discussion Topics
Portfolio Settings Calculations Spreadsheet
12 replies, 1696 viewings
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OmniVest User Forums
General Discussion Topics
Portfolio Settings Calculations Spreadsheet
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Last Activity 4/15/2019 7:43 PM 12 replies, 1696 viewings |
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Mark Holstius Elite    Posts: 744 Joined: 10/11/2012 Location: Sleepy Hollow, IL  User Profile |
Since there are so many times I’ll be referring to similar terms in this post, I’ll attempt to make it somewhat easier to keep track of them by “color coding” the terms to make them as close as possible to the colors I used when building the attached spreadsheet… Account Equity Strategy Allocation % Trading Equity $ Trade $ As % Of Trading Equity $ Buying Power Trade Multiplier I think of the settings in OV as using these 3 basic steps: (1) Buying Power determines the Trading Equity $ available. i.e. With Buying Power at 200% Trading Equity $ = 2X your Account Equity. (2) OV Strategy Allocation % yields a Trade $ amount based on the Original Account Equity. (Not Trading Equity $) (3) If you want your Trade $ amount to be based on the Trading Equity $, then you have to modify the Portfolio Trade Multiplier to adjust the underlying Strategy Allocation % to achieve what you want. The table below is on the attached spreadsheet and shows the various possibilities. Notice that any time the Buying Power and Trade Multiplier have similar values, the actual “Trade $ As A % Of Trading Equity $” is the same % as the Original Strategy Allocation %. (1) The 1st example below makes no Margin or Trade Multiplier changes: A) BP 100% x Account Equity of $100,000 = Trading Equity $ of $100,000 B) Trade Mult 100% x Strategy Alloc% of 20% = 20% of Account Equity = Trade $ of $20,000 Result: The initial Trade size of $20,000 = 20% of the $100,000 Trading Equity $ (2) In the 2nd example below both the BP and TM are halved: A) BP 50% x Account Equity of $100,000 = Trading Equity $ of $50,000 B) Trade Mult 50% x Strategy Alloc% of 20% = 10% of Account Equity = Trade $ of $10,000 Result: The initial Trade size of $10,000 = 20% of the $50,000 Trading Equity $ (3) Now, suppose we substitute a different value for the Trade Multiplier in the 2nd example: A) BP 50% x Account Equity of $100,000 = Trading Equity $ of $50,000 B) Trade Mult 200% x Strategy Alloc% of 20% = 40% of Account Equity = Trade $ of $40,000 Result: The initial Trade size of $40,000 = 80% of the $50,000 Trading Equity $ (4) This time, let’s substitute a different value for the Buying Power in the 2nd example: A) BP 200% x Account Equity of $100,000 = Trading Equity $ of $200,000 B) Trade Mult 50% x Strategy Alloc% of 20% = 10% of Account Equity = Trade $ of $10,000 Result: The initial Trade size of $10,000 = 5% of the $200,000 Trading Equity $ The ratios can get a bit interesting depending on what you want to do, so I’ve tried to make it easier with the attached “Portfolio_Settings_Calculations” spreadsheet. I’ll repeat the simple 1st example above, but now entering values in what I hope is a more “user friendly” manner. (Only the Red and Green cells allow entries) (1) In the Red Cells I enter: Account Equity of $100,000 Constructed Strategy Allocation % of 20% (2) In the Green Cells I enter: Desired Trading Equity $ of $100,000 Trade $ As % Of Trading Equity $ of 20% The spreadsheet then calculates that I should: (3) Set the Account Settings Buying Power To: 100% (4) Set The Portfolios Page Trade Multiplier To: 100% Also notice that it tells me that the Initial Trade $ will be $20,000 (20% of $100,000) Now I’ll repeat the 4th example above in my “user friendly” spreadsheet. (1) In the Red Cells I enter: Account Equity of $100,000 Constructed Strategy Allocation % of 20% (2) In the Green Cells I enter: Desired Trading Equity $ of $200,000 Trade $ As % Of Trading Equity $ of 5% The spreadsheet then calculates that I should: (3) Set the Account Settings Buying Power To: 200% (4) Set The Portfolios Page Trade Multiplier To: 50% Also notice that it tells me that the Initial Trade $ will be $10,000 (5% of $200,000) The true benefit of this comes if you want to experiment with different values. Let’s say you decide to trade my new Flexible By Design Portfolio and have a Margin Account of $55,000. You decide you’d like to see what would’ve happened in the past if you wanted to do 2 things to modify your trading; (A) Limit your use of Margin and start your trading at $65,000 (B) Limit the Strategies to an allocation of 15% of that $65,000 (vs my 20% Allocation) (1) In the Red Cells enter: Account Equity of $55,000 Constructed Strategy Allocation % of 20% (what I built it to use) (2) In the Green Cells enter: Desired Trading Equity $ of $65,000 Trade $ As % Of Trading Equity $ of 15% The spreadsheet then calculates that I should: (3) Set the Account Settings Buying Power To: 118.18% (4) Set The Portfolios Page Trade Multiplier To: 88.64% And my Initial Trade $ will be $9,750 (15% of $65,000) BTW: here’s the result when using the settings above over the past 5 years; The spreadsheet is protected so that you can only make entries in the 4 Red & Green cells, and it will pop up a notice in Yellow if your inputs will result in a Buying Power above 200%. As always, I hope the attached spreadsheet & these instructions help with your testing; either with my Portfolios or any of your own… and that all the colors in this post didn’t just confuse things (?) Mark [Edited by Mark Holstius on 8/3/2016 5:51 PM]  Attached file : 21_Spreadsheet_Ex_01.png (66KB - 744 downloads) Attached file : 22_Spreadsheet_Ex_02.png (63KB - 730 downloads) Attached file : 23_Spreadsheet_Ex_03.png (65KB - 715 downloads) Attached file : 24_Spreadsheet_Ex_04.png (63KB - 741 downloads) Attached file : 31_Spreadsheet_Ex01.png (105KB - 750 downloads) Attached file : 32_Spreadsheet_Ex02.png (105KB - 751 downloads) Attached file : 33_Spreadsheet_Ex03.png (106KB - 739 downloads) Attached file : 34_Spreadsheet_Results.png (232KB - 738 downloads) Attached file : Portfolio_Settings_Calculation_Spreadsheet.xlsx (183KB - 303 downloads) | ||
| John C. Member Posts: 12 Joined: 7/7/2015 Location: Lost River, WV User Profile |
Thanks for taking the time to construct and layout this most excellent step-by-step color-coded (no, it didn't confuse things) tutorial and guide, as well as freely sharing it with the rest of us. Much appreciated! | ||
| Mark S Regular Posts: 56 Joined: 10/11/2012 Location: Barrington, IL User Profile |
More importantly, I believe my grandchildren and various faith-based ministries will benefit greatly from your work. Thank you! | ||
| kmcintyre Elite Posts: 890 Joined: 10/11/2012 Location: Portland, OR User Profile |
Cheers Keith | ||
| James McNeill Regular Posts: 68 Joined: 3/8/2013 Location: Victoria, BC, Canada User Profile |
Would you remind me why the "Max % of Equity" setting in the Margin account is set at 190% and not at some other number ? but especially at 200% James | ||
| Mark Holstius Elite Posts: 744 Joined: 10/11/2012 Location: Sleepy Hollow, IL User Profile |
I set it at 190 to allow some "breathing space" with Margin. In particular, OV uses the previous day's Close for calculating how many shares to buy the next morning. If the share price goes up in the morning, the purchase (# shares x new price) could be more than what you have available in your account and then be rejected by the broker. Mark | ||
| Keith Parsons Member Posts: 25 Joined: 3/12/2014 Location: Durban, South Africa User Profile |
On the old OV platform entering figures onto Mark's portfolio calculation spreadsheet and then placing the results into OV triggers the expected position size in IB. However and on the new OV spreadsheet and I do think I am entering correctly, the results in IB are not what I expect from my calculation results. I do realize from the many OV posts that there are a number of error / omission features that Barry is busy getting rectified. Would appreciate if someone could do a quick check and advise the outcome. Thanks, Keith Parsons | ||
| Mark Holstius Elite Posts: 744 Joined: 10/11/2012 Location: Sleepy Hollow, IL User Profile |
Can you help by letting me know what the specifics are in a bit more detail? Can you do a snag or post things like the Portfolio Trade Multiplier, Account Buying Power, what OV has for Trade Percentages vs what you're getting in IB? Maybe something changed with all this new stuff going on and it needs to be addressed? Thanks for your time, Mark [Edited by Mark Holstius on 8/18/2016 9:12 AM] | ||
| Keith Parsons Member Posts: 25 Joined: 3/12/2014 Location: Durban, South Africa User Profile |
I have run a few more "tests" and now get the results one would expect.Not sure why this now is. Probable error input / not saving my end when I was still getting use to the new platform.. Sure appreciate all the posts that you put out. Really grateful. Have a nice weekend. Regards, Keith Parsons | ||
| Mark Holstius Elite Posts: 744 Joined: 10/11/2012 Location: Sleepy Hollow, IL User Profile |
Glad you got it figured out - and that something hadn't happened to change the way things are calculated by OV. A good friend of mine was recently in Durban and really liked South Africa - I'd like to make it over there too. Hope you have a nice weekend, Mark | ||
| James McNeill Regular Posts: 68 Joined: 3/8/2013 Location: Victoria, BC, Canada User Profile |
There is a option called 'trade sizing' in settings in OV. This option seems to do the same thing as 'exposure' does in the trade-platform. Am I right in assuming that this setting is for configuring simulations in OV and the 'exposure' option in the TP is to instruction Interactive Brokers what to do ? | ||
| Mark Holstius Elite Posts: 744 Joined: 10/11/2012 Location: Sleepy Hollow, IL User Profile |
Can you be more specific about where you're seeing the "Trade sizing" as a setting in OV? A lot of things have changed in the past couple of weeks... If you're discussing the new tab in Account settings, then there are a number of factors in there that will have a big effect on your trades - both in the simulation and the trades actually sent to your broker. I'd suggest clicking on the numerous "?" symbols on the page to pull up more information on each (a new capability in OV); Hope that helps, Mark [Edited by Mark Holstius on 8/20/2016 8:07 PM] Attached file : Trade sizing.png (106KB - 425 downloads) | ||
| Steve2 Elite Posts: 750 Joined: 10/11/2012 Location: Annapolis, MD User Profile |
The OV account setting Max % Equity is similar to the Trade Processor (TP) Max Equity trade setting. Is that your question? If so, here's how they work. In OV you have an account configuration that consists of some number of strategies (typically organized into portfolios) that you have enabled for the account. Each trading day after the market closes the strategies are run and produce a set of candidate trades. The candidate set of trades are sorted according to the "Trade selection ordered by" setting and then the remaining settings under the Exposure, Trade Selection, and Trade Sizing tabs are applied to filter out candidate trades that don't meet your desired criteria. Candidate trades that meet all of your account setting criteria will be taken up until your Max % of Equity is reached. Then any other qualifying trades will be discarded since you don't have enough equity to take them. The trade size calculation in OV is only approximate since it based on the closing price of the symbol. When the trade is submitted to the broker on the next trading day, the price may have changed (gapped up or down). In order to leave headroom for this occurrence, users typically set Max % of Equity to something less than 100% for cash accounts and something less than 200% for margin accounts. The TP needs a similar setting because it will do intelligent order submission if you have the Delay Opening Orders checkbox set. With this set, TP will submit closing orders first and then begin to submit opening orders as sufficient buying power becomes available based on when closing orders complete execution. The TP Max Equity setting is used to provide some headroom in case stock prices change quickly. OV account settings determine which trades are taken for both the simulation and live trading. The TP setting could cause some live trades to be discarded but shouldn't do that if properly set. Hope that made sense, Steve [Edited by Steve2 on 8/21/2016 6:32 AM] |
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