ArbMaker’s latest and best upgrade launches!

Yesterday, we announced the new features we have implemented in ArbMaker.

And we have great testimonials from both the institutional and retail sector.

Today, we officially launch our latest version of ArbMaker with 2 special offers. The software is better than ever with features commercially unavailable outside a vastly more expensive custom-coded platform. Don’t take our word for it: look instead to those client testimonials that came from betas of today’s release.

Those Special Launch Offers in detail…

For ArbMakerFX, valid until 25 May 2013, the offer includes:

• the time varying beta features essential (why?) for testing and trading more volatile pair relationships. This IS an exceptional feature usually reserved for ArbMakerPlus clients.

• a US$50 reduction on each purchase

• a cumulative deal possibility with our Facebook offer of a 10% reduction for 2 referrals. This FB offer expires this Sunday, 12 May 2013 at midnight GMT.

And for ArbMakerPlus, valid until 25 May 2013, the offer includes:

• a 15% reduction on monthly lease subscriptions – extended to include renewals!

ArbMaker MT4 Auto-trading (plus a lot more) tomorrow

Tomorrow we launch the latest incarnation of ArbMaker along with very generous purchase and lease deals!

Some of the new features:

• Streamlined install process using an embedded database for easy install and management: no more SQL Express!
• Fully compatible with retrospective ArbMaker data exports
• MT4 execution bridge for auto trading
• Auto-detection of MT4 broker lot granularity and set to lot, mini lot or micro lot resolution accordingly
• Completely revised user documentation
• Dynamic filters monitor cointegration status and can be used to enter or exit trades
• Dynamic filters now have a master on/off switch
• Drawdown now included in the equities backtest report screen
• Runs user supplied price data via .csv files
• Only unit roots test passing at 99% move to cointegration testing. Strengthens the profile of  pairs coming through the scanner
• PACF bypass added to the ‘Bypass filters’ option. This permits dual listed equities, such as Total SA (Paris & NYSE) to appear despite autocorrelation.

Iron ore: equity vs futures

Intriguing chart and snippet from Morgan Stanley below (via ftalphaville.FT.com). This type of potential arbitrage opportunity is precisely the sort that the ArbMaker futures module currently being coded will be able to analyze:

“With iron trading at $134/t, iron equities (P+P EV/t) are trading at a mean of $1.27, or 52% below the Sept’12 level when iron was at $87/t. Whilst the equity market did not ‘buy into’ iron remaining at that low level then, the market now is not giving the companies credit for the current iron ore price. Sentiment remains weak with soft Chinese economic data and Chinese steel mill guidance of a continued negative vector in iron ore pricing. However, analyst Rachel Zhang in the 29 April Asia Metals and Mining Weekly noted China’s rebar output in March jumped 22.5% from Feb to hit a historical high of 16.47Mt. The MS commodities team observes that both mill and distributor steel inventories have started declining, and holds the view that seaborne market will remain in deficit in 2013 & ‘14 in light of supply-side issues and improved prospects for Chinese demand.”

Biggest arb trade ever ends on 20 May…

Fascinating paper (HT: ft.alphaville.com) from Robert Treue III’s Barnegat Fund documenting what has been called in the popular press the largest arbitrage ever recorded. In the financial upheaval around the opening of this trade in late 2008 the fund was down 37%. But he had the room to absorb the vagaries of timing and come good.

A pic of the arb is below and some interesting background on Mr. Treue, in his own words, is here.

Most interesting, though, is that Barnegat do exactly what Long Term Capital Management did. Only with less leverage/more collateral.

Interactive guide to the Active Portfolio screen

A few of the current features in the Trade screen. Hover over the icons for details.

Until 12 May it is possible through our Facebook promotion to get a 4 week license and have an extended run on ArbMaker.

Go here for a much bigger sized version!

Long Facebook, short…

We are now on Facebook. Marketing made us do it.

Our goal here is to put our software into more computers and get more engaged with users. If we can do that it will help us make a better product.

To encourage that end we will use our new Facebook presence as the primary means to launch offers and incentives.

The page is currently brand new and unpublicized but does have an inaugural ‘Welcome’ initiative for visitors who become fans here. 

We have some excellent new features coming down the pipe – for example, futures support, MT4 auto-trading and a stunning scheduler module. And now we now have another platform to announce them on!

Crown Castle International versus SBA Communications

Although our April newsletter concentrated on Nokia and Blackberry within the scan list was another pair of promise: Crown Castle International (CCI) and SBA Communications (SBAC).

These are wireless tower companies relaying calls from handset makers like Nokia and Blackberry but untroubled by the software wars in that industry. Indeed, so long as the explosion of call and data usage due to tablets, phablets, cell phones and the roll out of 4G continues the happier they are.

The favourable environment has not gone unnoticed by the market. CCI, for example, sports a P/E of well over 100; and both firms are around 10 times sales. Heady valuations like that are one of the factors making  relative value methods attractive.

How attractive depends largely on the set-up, financing and leverage. The trade is not as historically profitable as the NOK/BBRY analyzed in the newsletter. But is not too bad either:

Cointegration & Forex: academic research

The release of the new ArbMaker MT4 execution bridge for semi and fully automatic FX trading is imminent.

Most of our background has been in equity trading which meant considerable research into the applicability of cointegration to foreign exchange trading before implementing the new features in ArbMaker.

There is a fair quantity of research of both a specialist and more general nature validating the technique for forex. In the latter category we are are adding one such paper to our Useful Links section.

The paper is Cointegration Based Optimisation of Currency Portfolios which contains on pages 16 to 23 some very interesting test results and conclusions. The abstract:

“Cointegration is a technique that has been used for some time to optimise equity portfolios, but there is limited evidence of its application in managing currency portfolios. This research examines whether there is any value to be gained by using cointegration based strategies to optimise currency portfolios that are U.S. dollar, Euro and Sterling based respectively. We build ‘major currency pair (MCP) tracking’ portfolios to replicate the classic index tracking strategy commonly applied to equity portfolios, overcoming the lack of an ‘index’ for currencies by using the most frequently traded currency pair for each portfolio, namely the EUR/USD for the U.S. dollar and Euro portfolios, whilst the GBP/USD is used for the sterling portfolios. We compare the out-of-sample performances of these portfolios to simple benchmark techniques of optimisation. The results are encouraging, with the detection of long-run relationships adding value, particularly for the sterling portfolios. Because of the generally low volatile nature of the cointegration portfolios, they could be leveraged to match the returns being offered to investors by the benchmarks, as they generally offered better risk-adjusted returns. They also enhance portfolio stability.

There are several side issues that are also discussed, such as whether profits can still be derived from applying simple trading rules to currency portfolios, and if so what are the best currencies to invest in and how far should an investor internationally diversify their portfolios. Some of the results found are encouraging, and point towards the added value given by ‘lesser’ currencies particularly the Scandinavian currencies, with the Swedish Krona appearing to boost the risk-adjusted returns of portfolios. Technical analysis is shown to still have a role to play in currency trading.”

ArbMaker MT4 beta update

Thank you, beta testers, for the feedback and ideas.

As a result, work continues on the latest iteration of ArbMaker but we are behind schedule by 3 to 4 weeks. We expect to release in mid-April.

Due to this delay we have re-instated the current production version of ArbMaker as the trial software.

New MT4 beta and assorted upgrades

If you are a client you should have already received notification of this upgrade and beta. If you have not please contact us to gain access to the beta.

For the last couple of months we have been implementing additional code and improving existing code. We now have a new version 2.3.4 in beta for clients and selected beta testers only with general release through our website to follow in 2 weeks.

The changes and additions:

• MT4 auto-execution code implemented. Semi-auto mode to follow in the general release – testers should only use demo accounts during this beta
• MT4 auto-detection of lot granularity – user broker interrogated and ArbMaker set to trade to the lot, mini lot or micro lot resolution accordingly
• Negative beta implementation for FX (where it is common) and equities (still under test for the Interactive Brokers execution interface)
• Optimization of data handling code in the MT4 bridge for faster scanning
• Only unit roots test passing at 99% are advanced for cointegration testing. This strengthens the profile of cointegrated pairs coming through the scanner and simplifies the presentation of the cointegration test process as compared to the pre-requisite ‘eligibility’ unit root tests carried out on each time series.
• PACF bypass added to the ‘Bypass filters’ option. This passes autocorrelated pairs when enabled and, for example, permits dual listed equities, such as British American Tobacco (NYSE & LSE) to appear despite the autocorrelation (due in this case largely to the time lag between exchanges). Autocorrelation must not be present for cointegration to be valid; but such pairs can be profitable. This feature a direct request from a client. Note: we do not mark autocorrelated pairs as cointegration fails now but will for the general release
• Dynamic filters now have a master on/off switch
• Pending trades now update in the ‘Open Items’ pane of the ‘Trades’ tab whilst awaiting execution
• Assorted minor fixes and refinements