Let MT know about your SHORT positions

[elfabre]

Hi Jerry!

Is there any way (a flag maybe ?) to let MT explicitly know that a position in a portfolio is a SHORT (opposed to a LONG) other than resorting to the hack/trick of put a negative amount of shares?

It seems that I am not able to find it. I am more than happy to use that trick but unfortunately, doing that, it screws up the total value of my portfolio.

For instance, I am stupid investor with $10000, and I just created a new portfolio in MT with a long position on SPY of $5000 and a short position on SPY of $5000 as well.

My money is fully invested and my two investments are worth globally $10000. As matter of fact, I can actually liquidate my two positions immediately and get $10000 in cash (no trading fees ;-).

But MT portfolio shows a total of $0 on the column "Value" ( actually it shows a "-"); $5000 first line and -$5000 second line: Total $0.

IMHO, the second line is wrong; it should report $5000 (not -$5000); that is the value of my SHORT position in case I liquidate it immediately.

$5000 (first line) + $5000 (second line) = $10000 that is right the total value of my portfolio.

And is not just an issue of minus signs. It is problem of numbers, too. If SPY goes up and the long position gains a dollar (conversely, lost $1 in the short position) it should be reported:

$5001 (first line) + $4999 (second line) = $10000

but MT portfolio likely would report:

$5001 (first line) - $5001 (second line) = -

Also the column "T.Cost" is questionable; I paid $5000 to open the Short position not -$5000! And the Total cost of the two investments is $5000 (first line) + $5000 (second line)= $10000, not $0 (actually "-") as reported by MT Portfolio (Total on the "T.Cost" column).

It could be a bug (grabbed unstable version last week) but I cannot believe nobody noticed this so far. So, I am assuming it is just me not understanding how to handle Shorts properly on the MT Portfolio or how to interpret the "Value" and "T. cost" columns. Help, what am I missing ?

Fabrizio

 

[Jerry Medved]

sorry for the late reply - missed the message.

for short positions, there are actually 2 components - the short position on the stock, which is correctly entered with negative value. And the cash you received which is in your account, so if you want things to be properly accounted, enter $CASH symbol with the proper dollar value.  note that the GAIN $ and GAIN % do show correctly for the short position.  

The current MT portfolio option is a simple line item tracking. It does not do complex position tracking.  

As for one position that is 5000 and anther -5000, that too is correct - they cancel each other out. Most brokers don't even allow you to short against the box, 

 

[elfabre]

Jerry, Tx for the hint!

I elaborated a little further on it and the following recipe came out:

TO LET MT KNOW ABOUT MY SHORT POSITION, I do the following 5 steps:

1) Add a line with the shorted symbol to your portfolio and enter the amount of shares shorted as negative number

2) On the same line, I enter the commission/fees as a positive (not an attempting negative) number.

3) Add a second line just after the first one with the symbol "$CASH" and put in the "Quantity" column the positive amount you received from the broker (the short sale profit MINUS the commission/fees).

4) Add a third line just after the second one with the symbol "$CASH" and put in the "Quantity" column the amount of money you want to commit to satisfy the broker margin requirement. For instance, I like to be on the super-safe side and I usually reserve (not available for future investment) an amount of cash equal to the short sale profit plus the commission/fees. Hint: this is the same amount of the previous $CASH line plus twice the commission/fees.

5) Add a fourth line just after the third one with the symbol "---" (Sub-total)

 

Today, I actually created the dumb investor portfolio of $10000 half invested in SPY long and the other half in shorting SPY (this time, with a huge and intentional $1000 of commission and $200 buy/sell price).

See the picture and notice the following:

A)) The short position is listed first and takes the first 4 lines. Then comes the single long position with an additional sub-total line (automatically added by MT, not really needed, but nice if you got more long positions, so you got the long sub-totals). In this particular portfolio I have no cash left for future investments (margin requirement cash is already accounted for on the third line), but in case, after the long position I add another "$CASH" line (which unfortunately comes with an additional useless sub-total).

B))  The Value on the short sub-total line $3850 is OK; that is exactly the cash I am left with if I cover my short position immediately. And the $6150 on the long sub-total line is also OK; that is exactly the cash I am left with if I liquidate my long position immediately. Regardless whether SPY goes UP or down, given my dumb investment, I gain/lose anything, so my portfolio value is still $10000 as correctly reported on the last line (TOTAL) column "Value". This is actually the main reason prompting all this recipe; getting the Portfolio values right so at any give time I know exactly how much money I got.

C)) SPY went up, from $200 to $246, a 23% gain, so I lost $1150 in the short and gained $1150. Focusing on the long position line, the column "Gain $" reports $150, the net gain once the commission/fees cost is accounted for ($150=$1150-$1000), whereas the column "Gain %" reports %23.01 the gain percentage NOT accounting for the commission/fees (23=1150/5000*100). "Gain $" and "Gain %" are not the same 'thing' seen from different point of view as expected, but their nature is quite different; questionable. IMHO "Gain $" should simply report $1150. The long position "Gain %" on the sub-total (2.5%) is actually correct and is the gain percentage this time accounting for the commission/fees (2.5=(($1150-$1000)/($5000+$1000))*100). Ideally, I expect the "Gain" on the stock position itself reporting the gain/loss related to stock price variation only (commission/fees playing no role). The "Gain" on the sub-total should focus on the money gain/loss, including commission/fees.

D)) The short position "Gain %" on the sub-total (-3,76%) is meaningless. This is due to the fact that value of "T.Cost" column on the long position ($6000) is correct whereas the "T.Cost" column on the short position (-$6000) is not; on a short sale I receive from the broker the stock sale cash ($5000) minus the the commission ($1000), thus it should be (-$4000). In this case the "T.Cost" on the sub-total becomes $6000 instead of $4000 and Gain% becomes -2.5% (which is correct) instead of -3.76%. You may think to correct this by introducing the commission/fees on the short position as a negative number (step number 2); it works for "T.Cost" but doing so screws up the more valuable "Gain $". This shows that merely hacking with minus signs may not be enough to correctly specify short positions.

E)) In summary, short position are actually submitted as four lines opposed to the long position which require only one line (and this was the gist of the initial question). However, this is not too bad since the essential info for the short position (with the exception of the wrong "Gain %") are nicely reported on the sub-total line which actually can be super-nicely collapsed, reducing the short position, indeed, to a single line. Too bad that the label "Sub-Total:" on the line itself cannot be renamed to something more appropriate ("SPY short" for instance).

It would love to see other recipes on how to handle the shorts.

fabrizio