Rebalancing application
Rebalancing application prepares automatic orders for the creation of balanced portfolios in the brokerage application of Interactive Brokers.
You can choose a daily, monthly or annual report you want to rebalance. Afterwards, the rebalancing app creates a batch of orders in CSV format to be uploaded into the Interactive Brokers‘ desktop application, Trader Workstation.
Using the AP US Large-Cap Hedged 1.5X Shares strategy for the first time
The portfolio is created by buying the most undervalued stocks taking up 60 % of your total portfolio and selling the most overvalued stocks filling up the remaining 40 %. The leverage of 1.5 is applied to the whole strategy. For example, when you are trading with USD 100,000, the average price of a single long position is USD 4,500, and the average cost of a single short position is USD 3,00.
The cost of one trade is usually USD 1, so the total cost of executing all the orders should equal USD 40 when using Interactive Brokers.
Rebalancing the portfolio after the first time by adjusting it to the actual report from StockPicking Lab
The number of executed orders may vary from 0 to 80. For example, if there are no changes in the price of any tickers, there will be 0 orders executed. On the other hand, if all the stock should be replaced, there would be all 80 orders executed.
Why use the rebalancing application?
Fractional shares
The rebalancing app supports buying fractional shares and enables having a balanced portfolio and trading all the shares precisely, as stated in the current report.
For instance, if the price of one share is USD 150.29 and the ideal position is USD 4,500, the application will include the purchase of 29.9421 (= 4,500 / 150.29) shares into the rebalancing order.
Fee limitation
The app is built to integrate only orders that wouldn’t be affected by the transaction fee too much. Therefore, the current limit is USD 50 from the original price. If you have purchased shares for USD 4,500, then the value of the position would only be adjusted in the next rebalance if the value of the new position is more than USD 4,550 or less than USD 4,450.
Have a look at the sample files
The application creates rebalancing orders equal to all investors trading the same amount of money. However, each person needs to reconsider if it is aligned with his investment goals.
