Sorry I didn't see the discussion on this earlier.
Our current released products ("Premium Data") default to RoundLotSize of 0 for stocks.
Our current released products ("Premium Data") default to RoundLotSize of 0 for stocks.
Our PDU test environment set to 1, but this clearly is not applicable to Genta Inc which delisted in September 2011, which has undergone 5 reverse splits for a combined historical dilution factor of 15000000! It certainly has been a fall from grace with this stock that was in the Russell 3000 for 10 years of 20 year history.
Future versions will have RoundLotSize set to 0 to avoid this issue.
This will introduce a slight side effect where your position sizes will be fractional and new buy signals may be introduced that would actually be able to executed.The only solution here that I can think of is to use a Custom BackTester that uses the "Open Interest" field to accurately determine fractional size. We store the original unadjusted close price in that field (for stocks).
For example, with GNTA-201109, let's say an entry was signalled on 20020122.
Position Size: $10000
Close (adjusted): $19800000
Open Interest (unadjusted close): $13.2
(Unadjusted) Position size would be int (10000/13.2) = int (757.5758) = 757 shares.
Fractional (adjusted) price positios size would be 757 * 13.2 / 19800000 = 0.000504667 shares
For most stocks such a change would have negligible impact on your trading system, but there are certain stocks that your trading system may never be able to purchase. e.g. Berkshire Hathaway prior to the Class B share being available (in 1996). Let's work through that one:
eg. BRK.A signalled a an entry on 19950105
Position Size: $10000
Close (adjusted) $20500
Open interested (unadjusted close) $20500
Position size = int (10000/20500) = 0
i.e. insufficient position size to even purchase one share.
We have seen a few occasions where a "butterfly" effect occurs based upon one trade changing... if that trade is never entered, sometimes the entire sequence of subsequent trades changes primarily because of capital limitations. That's a whole different discussion though!
Best regards,
Richard Dale.
Norgate Data
- Premium quality Stock, Futures and Foreign Exchange Data -
www.norgatedata.com
Richard Dale.
Norgate Data
- Premium quality Stock, Futures and Foreign Exchange Data -
www.norgatedata.com
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Posted by: Richard Dale <richard@premiumdata.net>
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