Equity trade management and risk reduction strategies | Schwab Advisor Services

ENTIRE TRANSCRIPT: EDDIE YBARRIA: Welcome, everyone, and thank you for joining our session today as we guide you through the trading lifecycle and break down areas of risk that can cost you money along the way. But before we dive in, allow us to introduce ourselves. My name is Eddie Ybarra, and I'm the senior manager on the Team Retreat Block Desk. I began my career about 15 years ago. And over that time, my prior focus has always involved helping end clients and RIAs build confidence leveraging our trading tools and limiting the cost of trading. And with me today is my colleague and co-pilot, Dan Dalpra. Dan? 

DAN DALPRIA: Thanks, Eddie. As Eddie mentioned, my name is Dan Dalpra. I am the team leader on the Schwab Equity and Options Trading Desk here in Denver, Colorado. I've been with Schwab for 15 years, in the industry for 26, which is hard to believe. I spend my days here helping clients with trade executions, primarily larger block trades that need some special handling, as well as helping our advisor clients, like yourselves, leverage our online tools and resources so that you can trade with confidence. And that's exactly why we're here today, to help you gain confidence as you manage your trading process. 

Our plan is to walk you through from the trade idea, that moment when you know what you want to buy or sell, to the finish line of getting the orders filled and delivered to your clients' accounts. We'll share some effective trading techniques for avoiding and anticipating areas of potential risk and guide you how to come through… how to overcome trade errors should they occur. 

We're going to end our session on a high note. We're excited to share what the future trading experience at Schwab is going to look like. We've had our developers and our product leads hard at work to bring you a trading and operational experience that incorporates the best of both TD Ameritrade and Schwab. 

So when it comes to Q&A throughout this process, we have a broad range of trading experience in attendance with us. So for something you don't understand, please ask us a question, send us your questions, and one of our traders will get with you as soon as they possibly can. 

I'm kind of a music guy so I pulled this quote from Keith Richards of the Rolling Stones. He said, 'Good music comes out of people playing together, knowing what they want, and going for it.' We all benefit when we work together and share the best practices, but we really want to focus on what's in it for you. 

You're going to have a better understanding of some of a common trading missteps that put your firm at risk and could negatively impact your end clients. We want you to see the importance of ensuring that your team has the proper talent in place, that they have the confidence, the continued training, and that you have the capacity to handle your workload. Further, how developing and adhering to a trading process that aligns with the trading lifecycle process we're going to discuss today can mitigate the risk of human error. 

In the end, we hope that you will not only have a comprehensive understanding of this cycle, but through this knowledge, your trading confidence will undoubtedly increase. As an added bonus, you're going to have less trade errors. You're going to find them earlier, should they occur. This should alleviate poor client experiences. And in the end, it's going to bolster your firm's brand. So doesn't that sound good? What do you think, Eddie? 

EDDIE: Sure does. Jumping right in. On the left is an abbreviated thought process that most people think of when trading for their clients, one where you're notified that you need to place a trade, you pull up your trading systems and execute that trade, and then you deliver those shares or cash to your client accounts. But when you take into account potential trading costs and the client experience, we really want to encourage you to stretch it out to a five-step process starting with look and recognize, order entry, double checking those trades, processing your allocations, and then that end of day reconciliation, making sure everything is cleaned up before you go home. Easy enough, right? 

So each section has subparts to it. So in an effort to create a full understanding, we've woven in some examples to help us out along the way. But before we jump right into that, Dan is going to run us through an area of risk that's often overlooked and just as costly as a trade error. 

DAN: Thanks, Eddie. There are so many order types and qualifiers we can utilize when we place a trade. But the most popular type that we tend to see is a simple market order. In the real world, depicting a market order, thinking about walking into a car dealership and saying, 'I'm a buyer and I'll pay anything.' You'll certainly attract attention to yourself if that's your goal. But I think we can agree that is not the most cost-effective way to buy a car. 

Now, there are some pros and cons to using market orders. On the plus side, you will get a fast execution. There's no doubt about that. You're not going to end up with a partial fill. A market order will guarantee you a completion on your order. It's also the path of least resistance. So a market order is not all bad, but there's some serious cons to consider, as well. You may have market impact with a market order. There is no control over the execution price that you're going to get. And stock and ETF prices can move against you in an instant. With a market order, you have no recourse or defense against such an event. 

So, Eddie, do we have an example of a market order that went awry to help us illustrate this point? 

EDDIE: Yeah, of course. And on this slide, you'll see how an oversized market order spiked a stock almost 4% in less than a second before moving right back down to its price range that it was trading out prior to that order. And on the left, I've tried to explain why this happens. When using market orders, you're seeking to immediately execute an order. So if you're buying a stock and there isn't sufficient liquidity, you're forced to pay a premium to encourage the market to come down and sell to you, or if you're selling, you're forced to offer discounts to sell at lower prices to get the market to buy from you. And the first step in trying to avoid this is to recognize if your trades pose any liquidity risk that could impact the stock price. And with that in mind, Dan is going to run us through and explain how we can identify this particular risk. 

DAN: Yes, thank you. Let's begin with the first stage of the lifecycle, look and recognize. Before we dive into each component, I would like you to think about the biggest order you've placed in recent recollection. Write that down. See if you went through the same steps that we're going to be explaining. If you didn't, make a note of where you deviated. Think about before you head out on a road trip in your car. Think of that pre-trip checklist you consider before leaving. What is the weather going to be like? What time do I need to get there? How bad is traffic going to be? Did you remember to load up the kids? You think about all these things before you pull out of the driveway. And years ago, it may have been difficult to gather all this information quickly. But with mobile apps, we can get information on things like traffic and weather, our estimated time of arrival in almost an instant. So taking a few painless steps before you venture off can save you time, can save you money, and certainly save you a lot of frustration. 

The stock market, exactly the same way. There are tools available at your fingertips to look and recognize the environment that could impact the results of any given stock or ETF trade. Based on the previous example where the stock spiked almost 4%, we want you to realize that you need to look and you can recognize if your order exceeds inventory. This is the way we can avoid such spikes and paying too high for the price of a stock, or in the case of selling, getting a lower price than you were hoping for. So how does one look and recognize? A plain stock quote, it just may not suffice and we're going to show you why. 

So just like we have that pre-trip checklist that we discussed for our road trip, let's look and recognize, and review this pre-trade checklist. Before we venture off and place the trade, let's ask ourselves a few things. How much inventory, size, or what we're going to refer to as liquidity, is available at the best price? What is the displayed liquidity at the next available price levels? Is my order oversized compared to the market volume for the day? What are the current market conditions? And what are your investment objectives in regards to price and to time? 

The first three items from our checklist on that prior slide reference liquidity concerns. But before we dive in further, let's make sure we have a general understanding of what liquidity means when it comes to trading stocks and ETFs. Simply put, liquidity is the ease with which a security can be bought or sold without impacting its price. You look at things like trading volume, the gap or the spread between the bid and the ask, and the market depth, something that we're going to touch on a little bit later in the presentation. But, generally, if you see high trading volumes with a narrow spread between the bid and the ask, there's likely a good amount of liquidity to absorb the impact of most of your trading. 

EDDIE: Yeah, these are great points. And to help us understand this liquidity risk, we pull a couple examples of level one quotes to use. A level one quote displays the best bid and ask or offer prices. You probably also heard these two price points referred to as the NBBO, which stands for National Best Bid and Offer. And looking at these two symbols and taking into account what Dan just mentioned about volume and spread being an indicator of liquidity, which security do you all think has better liquidity, A, SPY, or B, TZOO? Going to be A, right? And here's why. In regards to volume, SPY's volume is almost 22 million shares. Massive. And with an ocean of volume like that, it can easily absorb a larger buy or sell much easier TZOO could, which has barely traded 7,000 shares thus far. For example, if you have a 10,000 share order for both of these, 10,000 shares is a drop in the bucket for SPY. But for TZOO, that's almost 140% higher than the current day's volume. And filling a relatively large order like this, it's like trying to squeeze a family of five into a tiny little Mazda Miata. I mean, you can do it if you wanted to, but it's definitely going to hurt, right? 

And the second thing we want to review is the bid and ask spread, and that involves looking at the price difference between the bid and offer. And for these two, we can see that SPY's bid price is 443.12 and the offer or ask is 443.14. That's a two-cent difference, or half of one basis point, a really tight and a really good indicator of liquidity. On the other hand, though, you got Travelzoo that has a 13-cent difference between that bid and ask price, or about 200 basis points. 

Now, I know these are a couple of extreme examples, but, hopefully, that helps paint a better picture for you all. I mean, Dan, what are your thoughts? Would you ever trade with just a level one quote like these two here? 

DAN: You know, in some cases, Eddie, it might be enough, but depending on the data points that you just discussed and the size of my order, we may want to dig a little deeper before placing that trade. And that brings us to what we call a level two quote, which gives us a little more information to help us determine liquidity. A level two quote contains all of the information that a level one quote has, but in addition, it shows bids and offers that are outside that NBBO, that National Best Bid and Offer that are away from the best price. 

So Eddie, let's simulate a trading scenario where we've been instructed to buy 150,000 shares of symbol QCOM, Qualcomm, and walk through the look and recognized process using both a level one and a level two quote. 

EDDIE: Sounds good. So reviewing that checklist and starting with question one, we want to gather the info to help determine how much size is available at the best price, and a level one quote gives us just what we need to answer that question, right? Circled in purple on the screenshot here, you can see that the volume is a little over 3.7 million shares traded thus far, and the bid-ask spread is about three cents. In addition to that, though, a level one quote also shows you how much inventory is currently displayed at the NBBO, or the Best Bid and Offer. So we can see that 200 shares are displayed at the best bid price and 100 shares are available at the best offer, and you can see that to the right of those two bid and ask quotes, the two and the one indicated there. 

Now, with only 100 shares displayed on the offer, you're right to worry that there may not be sufficient liquidity to buy 150,000 shares at the best price. But what about at other prices? That's when you want to utilize a level two quote. To answer question two, how much inventory is displayed at the next available price levels? And on the lower right, you can see that I've tried to circle that again in purple, there's only 900 shares displayed for sale from that 28-cent mark, all the way up to the 37-cent mark there on the right. Still, that's not nearly enough to fill an order for 150,000 shares right?

Now, there may be some non-displayed liquidity out there that we don't see, but that's an entirely separate and a bit more complex discussion. The key takeaway that we really want to make here is to keep in mind that a level one and two quote or view are there to help you know when the display liquidity conditions present that heightened risk of impacting the stock price. Reviewing the level two, it's not mandatory and you may not even have access to one, but this simple example, it's only confirming the potential lack of liquidity that we already saw when reviewing the level one quote for Qualcomm. 

I mean, Dan, I think you would agree that level two quotes, it's helpful, but it's not to provide you with a complete view and you can still navigate this look and recognize stage without it, right? 

DAN: I totally agree, Eddie. I mean, the level two quote can be very helpful. It's not always necessary. It's an extra tool that you can use when you're managing your trades. It could help you potentially set your own limit prices if you're looking for an alternative to a market order, and you can gather some pricing information, potentially leaked by others. I mean, for example, if you look at a level two quote and you maybe see 50,000 shares of stock being advertised for sale at one of these other price levels, that could give you a clue to some additional liquidity that may not normally be there. 

EDDIE: Yep, totally agree. Again, it's not a deal-breaker if you don't have it, but it's nice to have. And with this information that we gathered by reviewing those level one and two quotes, we can now turn our focus to answering question three, which is, is our order oversized? And we do that by comparing the size of our order to a couple of things. First, the size order, the NBBO. And, again, we already answered that. Clearly, 150,000 shares is far greater than the 100 shares that we see displayed at the best offer. And then we also know that there's not much displayed at the other price level on that level two quote because there was only 900 shares shown. 

Next, we compare our order size to today's volume and the ADV, also known as Average Daily Volume. And for those of you that have never heard of ADV, we're going to take a quick minute just to explain what that is. At the top right here from the screenshot, you can see that I've added ADV as a column to a watch list that I have on thinkpipes. The only difference is that thinkpipes calls it volume average. Now, Average Daily Volume, it's the average of the total day's volume each day over a given period of time, like 20 days or 30 days. And the ADV in this case is 11.3 million shares traded daily. You can also find ADV on Schwab's Advisor Center and iRebal, as well. Again, I mean, knowing our order size now and how to find ADV, at what percent of that Average Daily Volume would you consider an order to be oversized? 

DAN: That is a great question, Eddie. Honestly, it's a pretty tough one to answer definitively. Some people might say 2% or 5% of the ADV to be their threshold for concern and having impact on the stock price. Others may use a size, a trade size threshold, say, 10,000 shares, or some notional dollar amount. But, honestly, quickly recognizing liquidity and being able to get a feel for what impact you might have, it is definitely a skillset. It takes experience. You know, looking at hundreds of quotes and placing many trades over the years will fine-tune your ability to identify liquidity more quickly. 

So if you're not sure, if this is new to you, this is when you would want to give our trading desk a call. It's literally what we do all day. We can help you with the trade. We can teach you how to pick up some of these skills so you feel more comfortable managing your own trades. 

EDDIE: Yeah, and I'll just also chime in there, just to say, if you don't know what contact number is, your trade desk, how to reach them, just hit us up in that Ask a Question, the Q&A box, and give us your contact information, and we can reach out to you with the direct contact line for our trade desk there for you. So thanks for that, Dan. 

Now, now that we've confirmed that there is a risk of impacting the stock price with the careless trade, we need to review the current market conditions, you know, checking for any additional risk not found in a level one and two quote, sort of like checking the day's weather forecast before heading out on that road trip. A quick temperature check of the market could, you know, involve checking for abnormal volumes or looking for events that impact market volatility. For example, have there been any global or macro events that have increased the selling pressure in a specific sector, or is there a news or earnings announcement approaching that could swing the stock price in a significant way?

This additional step will assist you with setting proper expectations as you move into the final question of the pre-trade checklist, that being, what are your investment objectives, basically asking yourself, why are you placing this trade? At this stage, you're aligning your trading needs with price and time availability. And on our trade desk, this is our greatest concern when you leverage our desk to help execute a trade, because this is when we're attempting to set realistic expectations that also meet your needs. 

And when aligning market conditions with your needs, you need to ask yourself if you have a desired price in mind, you know, some value the trading idea was generated off of, or minimum amount that you're willing to sell for, to generate cash. And on the flipside, know when you need this trade done by. For example, does it need to be done quickly because you have a list of buy orders that you need to place with the proceeds from a list of sale orders. Or do you have extra time? Maybe you don't need it done till the end of the day, so long as you can allocate your trades and go home before the end of the night, right? 

For large or illiquid orders, understanding what you're attempting to accomplish will help you determine how you plan to balance a potential increase in trading costs due to trading too aggressively and shooting the stock up with the potential risk of the stock moving away from you by taking too long to execute that trade over a period of time. And if your order is for only 500 shares, you would probably experience a flat line near the bottom of this chart, because with enough inventory to absorb that order, you have zero risk of impacting the price, regardless of how aggressive or fast you trade. Again, the only risk you have is the stock price changing over time or getting away from you by going too slowly. 

DAN: Yeah. Thanks, Eddie. I mean, from start to finish, this pre-trade checklist should take you maybe 30 seconds or less when you get the hang of it. 

So let's take a quick recap where we're at here. You have your order to buy 150,000 shares of Qualcomm. They run through our checklist to determine if there's any potential impact replacing that order. Given the size, you determine you're going to want to use a strategy other than a market order. This could be using one of our various algorithms available to you through our trade desk, or maybe you just decide to manually break up the order throughout the trading day. Whatever you decide, you execute the plan. 

So if you've done things correctly, you should not see that big spike up or down in the price like we did on the previous slide. In fact, if you've chosen to be very passive in your strategy, you may not be able to detect any impact at all from the placement of your order. You'll simply blend in the trading volume of the stock, you know, virtually unnoticed. 

As a side note, I do want to briefly discuss another source of liquidity that is specific to trading ETFs. This does not apply to individual stocks. It's a tool available on our trading desk that we call request for quote, in which we request a two-sided quote from seven market makers all at the same time, and what they do is they compete on best price to win the privilege of executing your order. So the type of liquidity these market makers have access to is not visible on a level one or a level two quote. It's a fantastic tool that we use when we trade ETFs. We could probably do an entire presentation just on that process. If you would like to learn more, please contact our trading desk and ask about request for quote next time you're considering a sizable ETF trade that you think might have or could potentially have some impact on the price. We'd love to share that with you. 

So that being said, let's take a moment and review where we're at in the lifecycle. We've been discussing look and recognize and our pre-trade checklist, but let's talk just a bit more about the mechanics of entering a simple trade to buy or sell, and just a few double-checks we should be making to keep us out of trouble. What do you have for us there, Eddie? 

EDDIE: Yeah. Well, like the saying goes, measure twice cut once. And when it comes to trading, it's essential to make sure that your order details are correct. Some last minute checks that we encourage you to take immediately before and after you send an order are to verify your side, whether or not you're buying or selling, the symbol, quantity, and order time. And in your case, as RIAs, you need to make sure that you're trading in the correct account number because you're dealing with master accounts and client accounts. And we've called out these key points on this screenshot from thinkpipes here. If you're a buyer, is it a buy order? And thinkpipes made it even easier to distinguish between a buy and sell order by displaying buys in green and sells in red. 

And we've also seen some costly trade errors from firms who have traded the wrong symbol. So please make sure that you have the correct symbol entered. If you need to buy GLDs in Dog, did you accidentally enter it as GLVs in Victor? A way to help with this is by making sure that the share quantity lines up with the total notional amount that you need to buy or sell. In this example, GLD is $170 stock, where GLV is a $9 stock. So, clearly, our share quantities would be drastically different if we were trying to invest $10 million. 

And when it comes to working with our desk or contacting our desk to have us enter the trade for you, I can't stress it enough, but please, please, please pay attention to our read-backs when we're confirming your order instructions because we're human, too, and can make a mistake in the order entry process or misunderstand your instructions. I mean, we just had an error last week where we misunderstood a B as in Bravo for a V as in Victor when entering their trade. 

Now, Dan, with our order details accurately entered and submitted, what do you encourage traders to do next? 

DAN: Yeah, thanks, Eddie. It is surprising how often people skip this next step. After you think you've successfully entered your order, always be checking your order status screen on whatever platform you happen to be using. This is the screen that shows if your order has been filled or not, or even if it's been placed. So if you don't see your order on the order status screen, likely that something has gone wrong. 

It's also a great time to verify that you've placed the order in the correct account. It's a very easy thing to overlook or make a misstep there. We get a fair amount of trade errors that could have been very easily presented… prevented, I'm sorry, had the advisor simply checked their order status before walking away from the screen. In fact, we just had a situation here recently where someone had placed a fairly large order early in the morning. For some reason, either they thought it didn't get filled or they forgot, they placed the same order again later in the afternoon and it was filled twice. There was an error and it cost the firm some money in that situation. So just checking that order status screen would have certainly prevented that mistake. 

So at this point, we've got our order out in the marketplace, but we still got some work to do to safely make our way back home, so to speak. We still need to ensure that the shares that we've traded in our master account get properly allocated to our client accounts, and that we reconciled our books for the end of the day. 

EDDIE: Yes, and with the exciting part of trading out of the way, we know this operational step of allocating your trades to hundreds or even thousands of accounts can be a bit nerve wracking, especially when clients aren't always the most forthcoming with the actions that they've taken within their own accounts each day. So we'll also run through some potential unknown obstacles that may impact your ability to ensure your master account is flat at the end of the day. 

And, clearly, this stage of the trading process is a pain point for most of you because when we polled RIAs last year, 45% of you said that the process of allocating was your biggest concern. And successfully allocating trades is probably something that gets no love or praise, and really isn't even a point of focus until something goes wrong. Buit the ability to catch a trade error and avoid a poor client experience is exactly why it's important to ensure that your client accounts have received the correct number of shares if they're a buyer or cash if they're selling. 

DAN: Yes, and, in addition, it's important to make sure that your master account is flat, as well. You know, any unintended shares remaining in the master account after you've allocated is a red flag that something has probably gone wrong. 

So in this next slide here, we have a shopping cart which represents the master account, and in that shopping cart is 150,000 shares of the Qualcomm that you've just purchased. The advisor in this case is now driving those shares to his clients' accounts via the master account or shopping cart in this instance. And you can see on the top right here that Mr. Jones has purchased 25,000 shares and has 21 investments or positions in his account and a new cash balance of approximately $13,000. Ms. Smith bought 57,000 and has 33 positions and a new cash balance of about $6,700. The balance of 68,000 shares remaining on the bottom right there of Qualcomm, went to the Miller Family Trust. That account now has 54 positions and a new cash balance of roughly 21,000. The shopping cart is now empty as it should be. This represents your master account, just like your master account should be empty when you've completed that allocation process. But things don't always go as planned. 

Let's take a look at another little checklist here. We've got our allocation checklist. What should we be looking for? Our master account should be flat for positions and cash. All trades should be in the correct accounts. All accounts should have the correct cash balances, and the accounts, of course, should have the right number of shares. If there's any positions in the master account left over, you know we know we have a little problem. So what could cause this problem? The trade might not be fully allocated depending on the number of shares left in your master account. Maybe the allocation that you sent doesn't match the amount of shares that you traded. We see this from time to time, somebody trades 10,000 shares and they only send an allocation for 8,000 shares for some reason. Maybe the trade couldn't be allocated to a specific account, it didn't have enough cash or positions to accommodate the trade. And, also, very common, there could be a restriction on the account that's preventing that account from receiving an allocation. These are all common reasons why you still may have some positions still lingering in the master account after you've submitted your allocations. 

EDDIE: Yeah, this is where we really want to stress the importance of maintaining clear and open lines of communication between you and us, your custodian, because this may help you avoid a negative client experience and having to work through some of the problems that Dan mentioned on the right. 

So some of the things you can do, you can attend events and sessions like this to learn more about the tools and techniques that may improve your workflows. But one of the easiest things that you can do is subscribe to available alerts that attempt to notify you of client account activity. Subscribing to these alerts could prevent you from allocating to an account with a bad address restriction or one that's in the process of transferring assets out. There's also alerts to notify you if trades are still sitting in your master account awaiting an action by you. 

And these alerts can be a lifesaver, but two points that we really want to stress here when subscribing to them is, first, it's important to make sure that you have the right people subscribe to the necessary alerts, especially when you're onboarding new hires. Second, please don't solely rely on the use of alerts to protect you from any potential errors. Use it more as a compliment within this trading process or lifecycle to provide additional color. Easy enough, right? 

So with our trades executed and allocated, Dan, take us through that final stage, the reconciliation process. 

DAN: Yes, this process is crucial. Each action you take is going to have a reaction on the overall client account. For example, Ms. Smith's account should always have less than 10,000 in cash, according to your model. So if there's more, there's an issue. Or the Miller Family should never have less than 50 positions for the diversification you've planned for them. And if for some reason, Schwab's books and records aren't matching your own, you have an issue, what is commonly referred to as a break. And breaks help us identify errors that may require a resolution. So, let's say, that you meant to allocate 150 shares of a certain stock to a client and Schwab only shows 125 in the account, you have a 25 share issue that needs to be resolved. But you also find that another account has received 125 shares when they should have gotten 100. Well, there, your break is resolved. Now, that's a really simple example. There's many combinations of issues that can result in situations like this. Another thing that we do see, we see end clients from time to time making trades on their own without telling their advisor. We probably actually see this a couple of times a week. You know, all that to say the final step is very important in the trading lifecycle. 

Let's take a quick recap of this entire lifecycle as we've discussed it here. We started with look and recognize and that impact analysis immediately after you have that trade idea, looking for those red flags that could increase trading costs; the order entry and the double check, correctly entering your order, confirming that the order is working as you intended it to; and, as we just discussed, that post-trade allocation and that reconciliation that happens after the trade has been executed, making sure the client's account reflects your intentions. 

In a perfect world, we could stop right here, but, Eddie, we're all bound to make mistakes. So let's shift our focus on how the cost of making a mistake can be compounded when our trading process goes awry. 

EDDIE: Yeah. Thanks, Dan. In this case study on managing a trader, we have two firms, A and B. And we're going to simulate the potential impact of how skipping steps in the trading process can compound the cost of a trade error. For simplicity, let's pretend they each receive a request from a client to sell 100 shares of XYZ, but they both fail to enter the order correctly and submit an order to sell 1,000 shares instead. 

DAN: So, Eddie, I think you're telling me here that in this case, both clients made a mistake during the order entry phase of the cycle, is that right? 

EDDIE: Yeah, correct. They had a chance to verify that they entered the order correctly before submitting it, but, unfortunately, now, they've both made a mistake, and they've oversold by 900 shares. But here is where their paths diverge. Advisor A, she double checks her orders by reviewing the order status screen after submitting the trades and realized that she oversold. Advisor B, on the other hand, failed to review his trades before and after, and didn't reconcile his accounts at the end of the day either. In fact, he got so tied up on other things that he didn't realize he made a mistake for over a week. Six days pass, and the price of stock can move drastically over that amount of time. And in this case, by the time Advisor B was able to cover his error, it was trading at $468. That's $30 higher. A $30 move in the wrong direction, which leads to a $27,000 loss that the advisor is now responsible for. Compare that to Advisor A, who was able to get out almost immediately for near nothing lost. 

And we know it's near impossible to predict where the stock price will go in the future, and it can also feel very overwhelming to realize that you've made a mistake, especially if you're caught off guard. So I encourage you all to go back to your teams, and see if you have a procedure in place for how you work through a trade error. And if you don't have one or maybe need help creating one, consider this acronym, VVCC—verify, validate, cover, correct. Verify what was your original intent. Well, we know that we should have sold 100 shares of XYZ. Next, validate what went wrong or what mistake was made. We sold 1,000 shares, not 100. So now we know that we sold 900 in error. The next thing you want to do is cover the error. Close out that open risk as quickly as you can, limiting the risk of the price moving against you over time like we mentioned earlier, with that six days passing. But do it accurately by knowing what mistake was made and what you need to cover. Finally, work with us, work with the trade desk to process your trade correction so that we can get the client made whole and on their way. And, again, if you're lost at any point during this process, please pick up the phone and call us. We're here to help you out at any point or any stage in this process. 

Now, having a plan for how to quickly and accurately clean up an error is going to help you reduce the risk of compounding the mistake and the time it takes to make your clients whole again. Dan, anything that I missed that you want to add here? 

DAN: Yeah, Eddie, thanks. Every mistake is a learning opportunity. As unfortunate as that might be, things like this do occur from time to time. So take advantage of it. Review the trading lifecycle and your processes. Look for where you may have failed in the process, where you can make some improvements, what procedures you can incorporate to avoid a repeat of those types of errors. 

We hope you feel more equipped to tackle some of the more difficult trading situations that can arise and have seen how you can avoid risk along the way. Your trading plan may not be exactly as we presented it, but we just ask you to make it something repeatable, something systematic, so that it happens naturally in your course of business. 

Before we really wrap things up here, we just want to take a few moments and tell you a few things you can expect from the future of trading at Schwab. There are going to be some great new tools and efficiencies in trading as a result of our merger. 

Eddie, can you tell us a little bit about that? EDDIE: That's right. And although thinkpipes and iRebal may not be available until 2023, it doesn't mean we can't get excited and take a peek about what the future holds, and also showcase one trading solution that was just made available to all Schwab advisors earlier this year, that being the Strategy Desk. 

So kicking it off with thinkpipes, we're delivering a robust trading package that puts you in the cockpit to monitor the markets and efficiently manage your trades. There's so many features to get excited about that I found it extremely difficult to create a single screenshot that can encapsulate just a fraction of what this software can do for you. So at a very high level, you can select from a list of predefined watch list, as well as gain access to level two quotes like we showed earlier. And if charts and technical indicators are your thing, we've got over 350 studies that you can plot on a fully customizable chart. And when it comes to order entry and position management, thinkpipes makes it easy to enter and allocate trades in as few clicks as possible. I mean, I could spend a couple hours going through each feature and how thinkpipes can help benefit your business, but we can save that for a future discussion, and, hopefully, a one-on-one demo when thinkpipes made available to everyone later next year. 

Next up is our fully customizable rebalancing tool, iRebal. This is something that we're really excited to offer because we know it's going to streamline the portfolio management and trading process for you. Again, our teams could spend a few hours tailoring the software to your business needs, but since we're pressed for time, some key features we want to highlight are the tax-considerate harvesting techniques at the account and household rebalancing level. And you can also set rules and alerts that will monitor your cash balances in those accounts and assist you in knowing when to take action. 

And, of course, capping it all off, we've got our Strategy Desk. Like I mentioned, it's now available to all advisors, and their desk is completely free to use. This team is a group of veteran trading professionals with a primary focus of supporting advisors with one-on-one option strategy consultations. They teach you the mechanics of options and consult directly with you about the portfolio-specific needs of your clients, whether that's managing a concentrated stock position for a high net worth client or working to generate additional income in an uncertain interest rate environment. In addition to those one-on-ones, though, they also host a weekly trading webcast series. It's on Tuesdays at 4:30 Eastern, and it covers various trading topics and market-related topics, as well, like the fundamentals of option trading, simple to complex trading strategies, technical analysis, and a lot more. 

So I hope I didn't sell these services too short since I only had a few minutes, but, again, we sincerely hope you all share our excitement of what's to come. I mean, look at Dan. He can barely control that smile. He just wants to shake the camera and just jump through it, he's so excited. 

DAN: I am looking forward to all these new offerings, I can't tell you. It's going to be great for all of us. 

EDDIE: But, seriously, combining the best of both firms will be a journey, and our collective strengths and capabilities are with your success in mind, which is why we can't wait to share that impact with you, because we know that we can only shine when you shine. And with that in mind, I hope you all understand that our developers and integration team are working full steam ahead to bring iRebal and thinkpipes to you sooner. But, again, we anticipate a full rollout probably sometime the later half of 2023. 

So that's it. We've reached the end of the line. We look forward to working with you all again very soon. Thanks for sticking with us, and please don't forget to complete the survey for today's session. 

DAN: Yeah, thanks so much, everyone. We hope today's session helps your team become more efficient and confident when it comes to trading with Schwab. And we hope to get to know you personally if you ever get a chance to reach out to our trading desk and talk about any of the things we've discussed today. So have a great day. Thanks so much. 

EDDIE: See you guys. Thank you.