Re: Are Gains and yields still wrong for short sales?

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Posted by Luca on May 21, 2007 at 15:15:37:

In Reply to: Re: Are Gains and yields still wrong for short sales? posted by Mark on May 21, 2007 at 13:59:41:

: : Hi,
: : I'm trying out the program. I have plenty of short sales in my accounts and I cannot make sense of the %gain and yield fields in the reports.

: : I read http://www.fundmanagersoftware.com/q3q103/messages/5011.html which seems to describe the same problem.

: : Is this fixed/going to be fixed somehow?

: : Thanks,
: : .luca

: Hi Luca,

: Unfortunately, yields/gains on short positions are still not correct. The standard yield equations are always applied, and in the case of short transactions, these equations do not work. I've attempted to research how these calculations are supposed to be done in the case of short positions, but have not been able to find a solution. For example, if you had a simple case where you had a short position that started with a -$1000 balance, and went up to -$900, the standard yield equations would give:

: -1000(1+i)^term = -900

: This will give a negative value for 'i', which is wrong, since you gained value.

: Until we can find a definite answer on the right way to do these calculations, I think the best solution is to simply report them as N/A, and not support these cases. All of the valuations and capital gains reports do correctly support short positions, but not yields/% gains. I do wish I had a better answer...

: Thanks,
: Mark
: --
: Fund Manager - Portfolio Management Software

Microsoft Money calculates this. I'll check what it gives me when I get home, but going by memory it looks about right. The program does require you to explicitely indicate that something is a Short Sell (not a normal sell) and a Cover Short (not a normal buy). I speculate they did it because of the problems you brought up. They give themselves more info to modify their algorithms in case of short sales.

Are you actively interested in adding this feature (even if it requires adding two new kinds of transactions)?

I really like your software, but not suporting short sales gains/yields is a huge limitation in my case.

.luca

Replies:

• Re: Are Gains and yields still wrong for short sales? Mark 18:45:05 05/21/07 (3)
  • Re: Are Gains and yields still wrong for short sales? Luca 19:12:43 05/21/07 (2)
    • Re: Are Gains and yields still wrong for short sales? Mark 20:37:06 05/21/07 (1)
      • Re: Are Gains and yields still wrong for short sales? Luca 22:24:29 05/21/07 (0)