Happy Memorial Day to all. For Americans, this is the perfect time to reflect back on all of the many sacrifices our forefathers (and mothers) made so we can be where we are today. It is easy to forget about the many challenges of our past when we are so enveloped in our day-to-day dramas. So, in memory of all those who came before me, thank you for this fantastic country you made.
Ansergy is pleased to announce its Beta release of “TradeBook“. This update describes what the service is and how you might use it in your daily routines.
TradeBook begins with APT, the Ansergy ranking system of all WECC traded term products. Each day, Ansergy ranks 832 products against each other and returns a model bias (Buy, Sell, Hold). TradeBook applies a ruleset against those daily rankings and executes a “paper” trade. In the past, we have measured APT performance by valuing all Buys and Sells, but this is an impractical measurement since it relates to thousands, maybe tens of thousands, of trades. TradeBook screens out those tens of thousands of trade ideas and selects just a few.
Let’s look at some results of the current version of TradeBook.
The book traded 697 times and was profitable for 83% of those trades and generated an average margin of $0.78/mwh. In this version, we constrain TradeBook to just a rolling three months for all four traded hubs. Take a quick look at your trading floor and point to the folks that were right on 83% of their trades.
Same data, now we are aggregating results by “Hub.” NOTE: spreads are treated as different hubs in this aggregation. Some highlights:
- NP15 traded 56 times and was right 55 times (98% of the trades)
- The PV-MidC spread was right 90% of the time and realized the highest margins; $1.25/mwh.
- SP-PV spread had the lowest win/loss %, it was right only 53% of the time, but the average margin was better than NP15.
In this view, we aggregate results by Derivative. Note, in this book we are not trading Outrights, just derivatives. We believe that a derivative is a less risky trade than an outright. Adding outrights increases total margin but lowers the win/loss %.
Period Rolls (Month N to Month N-1) were right an astounding 94% of the time. The On|Off was right 82% of the time but had a negative average margin suggesting a stop/loss rule might be helpful. The Spreads were right 68% of the time but had a positive average margin of $0.59/mwh.
NOTE: all opens and closes are at the mid-market end of day settles. A good trader should be able to better those values on both sides.
We have several live TradeBook reports you can peruse:
- List of all Trades
- Profit and Loss Summary (by Hub and Period)
- Daily Change in Profit and Loss
- Cumulative Profit and Loss
- Position Report
Possible Uses of TradeBook
We believe the model can assist our clients in either hedging or speculative trading. For example, if I were entertaining entering into a Roll, opposite side of TradeBook, I’d want to reconsider the timing given that I’d have a 6% chance of getting the action right (buy or sell).
TradeBook is also useful in identifying APT’s strengths and weaknesses. We’d advise avoiding APT bias where results cannot generate positive margins.
The current version of TradeBook uses parameter values assigned by Ansergy. There are 15+ ranking parameters and about ten trading parameters. Each of those has many ranges of values, all of which drive different trade results. We recognize that each of our clients have different risk appetites and different end objectives in managing their forward exposure. Where Ansergy might trade all four hubs, a small Southwest utility may only trade at Palo Verde. Where Ansergy is focused on the front three months, a speculative shop may trade BOM out five years.
Given these diverse perspectives, Ansergy can offer a customized TradeBook solution to its clients. Under this approach, the client would be enabled to perform the following on a client-controlled dedicated server.
- Manage proprietary Ranking parameters
- Manage proprietary Trading parameters
- Entry/Exit rules
- Max Size
- Tradeable hubs, periods, and derivatives
- Use Ansergy marks or your marks; use Ansergy forecast or yours; intraday or end of day updates
- Stress-test hypothetical books
All of the above would be done on a dedicated server, installed with Ansergy’s APT software, but controlled by the client (root-level passwords given to client).
The Ansergy version of TradeBook is bundled with our client’s web-based subscriptions. The customizable version of TradeBook is offered as an add-on to the service. Contact Mike for pricing.