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edgebips / tastybugs

Bugs in Tastyworks, sent, logged and tracked for follow-up
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SPY-adjusted beta is incorrect on COIN #19

Closed blais closed 3 years ago

blais commented 3 years ago

Description of Problem

The SPY-adjusted beta on COIN is incorrect. I have a single short put and it's clocking me $332.5 of spy-adjusted delta, because its beta to SPY is calculated as $19.79. I suspect this is related to the fact that COIN only recently IPO'ed. It completely messes with the calculation from my portfolio delta and forces me to subtract it to know where my portfolio is at, in terms of SPY-deltas. In other words, it breaks a crucial measure of risk and hedging. I'm even contemplating taking the position off at a loss in order to get my measures back.

Here's a snapshot: image

User Impact

User is unable to consult SPY-adjusted portfolio delta.

Steps to Reproduce

Expected Behavior

Delta is computed accurately. If not possible due to the recency of this stock, use a different beta calculation or default to 0.0.

Suggested Improvement

Why is the title beta-delta but the suffix delta-beta?

Platform Details

TW version: 1.15.3
OS: Linux PopOS! (System76 derivatives of Ubuntu 20.10)
Java: Zulu11
lumia:~$ java -version
openjdk version "11.0.11" 2021-04-20 LTS
OpenJDK Runtime Environment Zulu11.48+21-CA (build 11.0.11+9-LTS)
OpenJDK 64-Bit Server VM Zulu11.48+21-CA (build 11.0.11+9-LTS, mixed mode)
blais commented 3 years ago

Hi Martin,

Thank you for the email, I am happy to help. We receive our beta weighting values from Morningstar and they calculate the beta on a 52 week basis. If an underlying recently went IPO, there will not be enough data to accurately calculate the beta for that underlying and Morningstar provides an erroneous value. You can reach out to Morningstar and ask them why they are not able to accurately calculate the beta for an underlying with less than 52 weeks of data. Unfortunately there is nothing we can do about this until they correct their formula. I have asked them for an explanation before and they have not gotten back to us about this. It is not a bug but rather an issue with the data provider and you will simply have to subtract the beta weighted delta generated by COIN from your portfolio. We are working towards using our own internally generated beta weighted delta in the future since Morningstar is unwilling to change their calculation to account for securities with less than 52 weeks of data.

blais commented 3 years ago

"For the time being, I have gone in and manually update the correlation for a handful of recent IPOs. The correct beta for COIN of 0.1362 is now being used and will be updated manually each week."

blais commented 3 years ago

Excellent initiative. It's a good fallback that will restore functionality in the meantime. Thanks again!