The trading stage of InvestOps focuses on the process of placing and managing orders. As a result, it usually comes up multiple times over the life of an investment.
The input for this stage is a trade plan, which reflects the investor’s underlying view. The first time this stage is reached for an investment may require a detailed plan as it represents the true entry of the investment. Later adjustments generally don’t require as much preparation since the positions are being adapted to meet changing conditions. The final trading stage, which may also be considered an adjustment of sorts, is closing out all remaining positions to exit the investment.
The purpose of this stage is to put a trade plan into action. This is where orders are created and managed through to completion. The exact steps will vary based on the brokerage or tools used for the process, but they generally involve submitting a trade ticket and waiting for it to fill.
There isn’t much room for flexibility in this stage. If the trade plan can’t be executed as designed, then it should be returned to the previous stage. It might not seem like a big deal to swap one option out for another, but the implications could be substantial for the investment. It’s important to review any potential changes as part of a normal planning process.
One place for manual intervention in this stage involves order strategy and management. For example, if there is low pressure to fill an order quickly, then it may be worth the time to place a limit order at the edge of a bid/ask spread and edge it in gradually until it fills.
Another example relates to trading multileg orders with low liquidity. It may be feasible to leg in or out of a strategy instead of opening it as a complex order to shave the spreads. However, this does introduce risk and effort, so be cautious if taking this route.
The output of this stage is a set of new or updated positions. The process then continues to the monitor/adjust cycle, returning here if trades need to be made.