Technical Updates of the Rebalancing Application

Our rebalancing application creates automated orders for the Interactive Brokers‘ desktop application Trader Workstation. The goal is to help you build your portfolio easily. It might be time-consuming and error-prone to try to fill in all the separate orders manually, especially for those with large portfolios.

If you choose our strategy, you will get one batch containing all the orders that you can upload into the application as easily as it is to process a batch of payments in internet banking.

When using the S&P 100 Balanced Strategy, the portfolio is created by buying the 20 most undervalued stocks taking up 60% of your total portfolio and selling the 20 most overvalued stocks rounding up the resting 40%. The leverage of 1.5 is applied for the whole strategy. For example, when you are trading with USD 100,000 the average price of a single long position is USD 4,500 and the average price of a single short position is USD 3,000.

If the amount of capital entered into the application was insufficient to trade more expensive shares (for example, with the price of USD 3 500 per share), then according to the list the other cheaper shares were included in the portfolio.  It was not possible to have a perfectly balanced portfolio because our application was also rounding the whole pieces of shares. If for instance, the cost of one share was USD 2,000, then only two shares with the total value of USD 4,000 were purchased in the long position even though the ideal position was indicated to be USD 4,500.

Overcoming this situation was made possible by Interactive Brokers enabling the purchase of fractional shares. It is no longer necessary to buy only the whole shares, you can now buy just a certain part (fraction) as well. The bonus is that the fees at Interactive Brokers for trading fractional shares are the same or lower than for the whole shares.

We have therefore updated our application to reflect the current situation. The latest version can make a rebalancing order including the fractional shares allowing you to have a balanced portfolio according to the up-to-date report. You can see how an actual CSV file containing the rebalancing order looks in the picture on the right side.