I've requested a new "feature" in IB TWS, and want to drum up some support for it in their feature poll to raise the prospect of it being implemented etc. The feature I have asked for is in their Combotrader platform, in TWS, and is to do with a combo trade for a combination of stock/stock specifically. at present when you create a stock/stock combo trade with 2 legs, one long one short, you get a "number" which you can set a stop loss on, but its not ideal, as the number they generate is as follows, (stock a price * number of shares in leg) - (stock b price * number of shares in leg) which gives you the figure, not ideal as I'm trading pairs, for the following reasons, - if both legs fall , the number falls, triggering your stop if set, not ideal as I haven't lost any money at that point. - if you set individual stops on each leg(possible) then again, if both legs rise you would be stopped out of the short leg, leaving you unhedged against the long leg. so I propose a new "feature" in combo trader that allows the "number" to be a ratio as follows, (stock a price * number of shares in leg) / (stock b price * number of shares in leg) which would give you a "ratio" and a meaningful position stop loss level to protect you against above scenarios, but also protect you against a trade going against you, i.e. scenarios like the long leg falling and the short leg rising, or individually. anyway, my request is that could people vote for this new feature on their platform, in the "features poll". the poll is id#: number 13714 or you can get to it direct on the following url, https://www.interactivebrokers.com/e...2493&sid=13714 thank you in advance for reading and hopefully voting for this new feature. Steve W
ok, lets say you have 2 equal size positions on 2 stocks , equal in money terms, one long one short, if the short goes down at the same rate as the long goes down the ratio, i.e. the number when you divide the long by the short stays the same, and you wouldn't have lost any proceeds. in comparison, if you use IB's way of working out their stock/stock combotrader number , in the same scenario their "number" , representing the two legs, one long one short, would have gone down relative to the long and short, even though the short would be making you money and the long would have been losing you money, overall no loss. but, and this is why I have asked for the "number" to be changed/added/selectable/whatever, currently if you set a stop loss order on their number, and both legs go down, the "number" also goes down, as they are representing the spread as long position minus short position, and you would be stopped out even though the trade was not losing money overall. what I am asking for implementing is long position divided by short position, i.e. a ratio, so I can now place a stop order on the combined trade, not one leg in either direction. hope that helps. regards
Please work this out for yourself again... (I understand the concept and importance of ratio spreads, and they are not used to calculate P&L.) Hint: if 'the number' as calculated by IB goes down, you will lose money on a long spread position (i.e. long stock a and short stock b).
correct, and that would also be the scenario if as a "ratio" spread one leg went the opposite way you desired, i.e. long down or short up. my poll is to ask for the "number" to be represented as a ratio (long) / (short) , rather than (long) - (short) so that if both positions move in the same direction, esp down, then the ratio stays the same and wouldn't trigger a stop order, as effectively you wouldn't have lost any money on the combo position overall, as your losses from your long going down would be offset by the gains you made by the short leg also going down.... this is of course only one scenario and worst case imho, as you would be stopped out of a position that was neutral to where you started capital wise, frustrating. the ideal is that your long takes off and your short either stays the same or declines, as i would be using my short as a hedge in this kind of trade, and IB's "number" would be fine to use as a stop level in that scenario, just not when/if they both went down together.....
I have to add, i'm not asking turkeys to vote for christmas here, just to add another feature that some other traders may find useful in the future, thats all...