very high minimum_capital values in report?

[bug-or-feature]

I wanted to adapt the Minimum Capital report for my spread bet system. The column names weren't applicable, but the contents shouldn't need changing, I thought. But the final column "minimum capital" had values so crazy high, that something must be wrong. Even increasing the instrument weight to 10% didn't result in sensible numbers

As a sanity check, I thought I'd check what the numbers looked like for the vanilla futures report. But I don't have a working futures system, so I adapted some of the reporting code to use the shipped CSV futures data. The resulting futures report has even higher numbers in the final column, eg GOLD £18.5m. See below

min_cap_futures_master.txt

What's going on - are the numbers correct? Approximately, given that the CSV data is a couple of weeks out of date

[robcarver17]

You are missing the effect of FX rates. Which is why the JPY (FX~100) and Korea (FX rate 1200) are so large.

[bug-or-feature]

So the values for USD currency futures are correct?

[robcarver17]

I haven't got time to cross check them but they look in line with my own up to date figures, https://github.com/robcarver17/reports/blob/master/Minimum_capital_report

[bug-or-feature]

No, you're right - I missed the FX step when using CSV data. Useful link to the real reports, thanks.

So how is that report useful? It says you need a minimum of £14.5m to trade GOLD. As a relative scale of affordability?

[robcarver17]

Yes but remember that's the entire portfolio.

It's 90k to trade a single contract of gold at 25% vol (full fat, micro is less), but if you want to hold 4 contracts that's 360k, and if that is part of a 100 instrument portfolio (instrument weight = 1%, IDM = 2.5) then you need 40 times that gets you to £14.5 million

[bug-or-feature]

Sure, I understand the maths. But why is it useful to configure the report with those numbers? From your blog and trading journal I understand you trade with ~40 instruments in the old system, and roughly half that with the new dynamic one

[robcarver17]

It's an interesting question.

For my new system, I don't actually use minimum capital, publishing them is purely a public service (and also tied into my new book). But I use the same number (assume instrument weight of 1%) in several places, and in the interests of DRY it is hard coded in one place. So it's used for example to auto configure position and trading limits.

With dynamic optimisation a useful question is, what exactly is the instrument weight? Trivially it's about 1% if you have 100 instruments, but as you say if you typically hold 20 instruments maybe the correct weight for this sort of thing is actually 5% if you hold 20 positions on average?

On reflection I think I will change it to 4%, eg 25 instruments, which is also a nice round number.

[bug-or-feature]

Thanks, I appreciate the explanation

[bug-or-feature]

From @robcarver17's comments

Yes but remember that's the entire portfolio

On reflection I think I will change it to 4%, eg 25 instruments, which is also a nice round number