Capital Pools — Starter Guide

Related:

Requires: Trade Reports (Trades menu, or Alt+Z) is available in every edition. The pool alerts mentioned at the end (Trade Rules) need the Regular edition or above.

What this guide does

There are many ways to organise trades and the money behind them. This guide follows one concrete routine from start to finish so you can see how the pieces fit, then shows where you can vary it.

The example: a monthly Rhino program

You enter a Rhino at 77 days to expiry every 28 days. All Rhinos share one budget. Because 77 ÷ 28 is about 2.75, at most three Rhinos are ever open at the same time if you hold to expiry: Rhino 1 expires on day 77, before Rhino 4 is entered on day 84.

The numbers below are made up for illustration. Say each Rhino can lose at most about 10,000, and you set aside 40,000 for the whole program.

You will use three things:

a tag, Rhino, to say what the trade is for and to compare it with your other programs;
a capital pool, Rhino, to say which money it draws on, with an amount of 40,000;
optionally, the trade's own Planned Capital, if you want a figure per trade. For this routine you can skip it: a trade without one is measured on the margin it carries (SOAP2's own estimate), else on its largest possible loss.

Set it up once (about two minutes)

Enter Rhino 1 as usual in the Options Analysis window and Convert (or let IB fill it). This creates the trade.
Open Trade Reports (Alt+Z) and click Rhino 1's row.
In the Capital pool box under the report, type Rhino and press Enter. In the box below it, type 40000 and press Enter. That creates the pool and its amount.
Double-click the Tags cell of the same row, type Rhino, press Enter.
Choose the grouping Capital pool › Trade in the toolbar. You now see a Rhino row.

The same pool box and amount box are on the Options Analysis toolbar, next to the Planned Capital box, if you prefer to do step 3 there.

Every 28 days: add the next Rhino

For each new Rhino, repeat steps 2 to 4 (click the new trade, pick Rhino from the pool box's list, add the Rhino tag). If you enter several trades in one go, bulk assign is quicker: highlight the new rows, right-click, Put selected trades in a capital pool... and Add a tag to selected trades....

What the Rhino row shows as the months go by

When	What happens	Open Rhinos	Capital used	Headroom
Day 0	Rhino 1 opened	1	10,000	30,000
Day 28	Rhino 2 opened	2	20,000	20,000
Day 56	Rhino 3 opened	3	30,000	10,000
Day 63	Rhino 1 closed, +1,500	2	20,000	20,000
Day 84	Rhino 4 opened	3	30,000	10,000

Hover the Rhino row to read these figures. To see them as columns, press the Journal columns button: Risk shows the pool amount (40,000), P&L % the return on it, Capital used what the open Rhinos use, and Basis reads "Pool amount". Those four are journal columns and stay hidden until you press the button. Three things to notice:

A closed Rhino releases its capital immediately (day 63: used drops from 30,000 to 20,000). You do not have to do anything.
P&L % is measured on the pool amount (40,000), not on the capital currently used. Rhino 1's +1,500 is +3.75 % of the pool.
A trade that has expired but is waiting for its settlement price still counts as open until it is settled.

If the program ever gets close to its limit you are warned: in Trade Reports (the status line) for everyone, and as a Trade Rules alert (dashboard and notification, Regular edition and above) once the open trades use 90 % of the pool.

When Rhino 1 is closed: keep it, or let it go?

Closing a trade changes nothing about its tag or pool by itself. You decide. There are three sensible choices:

Choice	Capital used	The Rhino pool row's P&L	Where the closed trade appears
A. Keep it in the pool and the tag (nothing to do)	Not counted: it is closed	Includes it: the row is the whole program's P&L so far	Under `Rhino`, with the others
B. Keep the tag, take it out of the pool	Not counted	Only the trades still in the pool	Under the tag `Rhino` (group by Tag › Trade for the program's lifetime P&L), and under (no pool) in the pool grouping
C. Take it out of both	Not counted	Not included	Under (no pool) / (no tag): accounted for separately

Choose A to see the program as a whole: "how much have all my Rhinos made so far, as a percentage of the 40,000 budget?". It is the default, and needs no work.
Choose B if you want the pool to be a picture of money in use only, while the tag keeps the lifetime record. Highlight the closed trades, right-click, Take selected trades out of their pool.
Choose C to retire a trade from the program altogether (for instance one you took for a different reason).

You can mix: keep recent closed Rhinos in the pool for a quarter, then take older ones out.

Using the filters to look at a period or a state

The Status boxes in the scope block decide which trades are listed:

Open and Closed are ticked by default.
Expired is not ticked by default. A Rhino held to expiry becomes Expired, so tick Expired (and Archived, once old trades are archived) or its P&L will be missing from the pool row.
Untick Open to review only what has finished (what did the closed Rhinos make?), or untick Closed and Expired to see only the live program.
Active in limits the list to trades active in a date range, for a month or a quarter.

The filters change what is reported, not what is in the pool: the trades stay in the pool whatever you tick.

Variations

Two programs, two budgets: a Rhino pool and a SleepEasy pool. Each holds exactly the trades you put in it.
Compare without a budget: skip the pool and just tag. Group by Tag › Trade to compare Rhino with SleepEasy.
A different pool amount in the second year: edit the amount in the pool box. The pool has one current amount, so percentages for past periods use today's amount.
A figure per trade as well: type a Planned Capital on each Rhino. The pool then also warns you when the trades' own amounts add up to more than the pool.
Start from one trade: if you put the first Rhino in a new, empty pool and it already has a Planned Capital, SOAP2 offers to use that figure as the pool amount. You can decline; both stay editable.
Another yardstick for the trades: the Risk basis list in the toolbar changes how each trade's own row is measured (planned capital, margin, or largest loss). The pool row always uses the pool amount. Hover a trade's P&L % to see the percentage on every basis.
Every entry in its own pool: possible, but a pool is meant to be shared; use tags for that.

Learn more

Full reference: SOAP2 Categories Tags and Capital Pools (this folder).
Trade Reports as a journal: SOAP2 Trade Reports Journal (this folder).

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