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As stated in the glossary, "bidtoOfferPickup" is:
A calculated value, used in the calculation of tradeDesirability and tradeScore, calculated by comparing the valuations of the two instruments involved in the trade, valuing the instrument to be sold at the bid and the instrument to be purchased at the offer
The best three trades ranked by "bidToOfferPickup" may be displayed in the bestTradesReportBox via the "by bidToOfferPickup" selection on the tradeMenu|Reports|BestTrades popup menu. This value is reported in the bestTradesReportBox and the tradeEvaluationReportBox. The calculation of this value is shown in the pickupCalculationBox.
This value is vital in the determination of recommended trades as explained elsewhere in the User Manual (tradeDesirability, weightedTradeDesirability and tradeScore) and so in order to understand why trades are being recommended a good understanding of "bidToOfferPickup" is required.
To view the calculation of "bidToOfferPickup", right-click a grid element on the tradeReport and select "Pickup Details" from the tradeReportContextMenu. This will display the pickupCalculationBox:
 The pickupCalculationBoxObviously there are a lot of components to this calculation but the intent is simple: to estimate as accurately and precisely as possible the amount by which a portfolio will be improved through the execution of the trade for which the value is calculated. The various components may be summarized as:
These values compare the static elements of valuation of the issues under consideration and may be regarded as the main components of "bidToOfferPickup". Valuation is discussed in another section of the User Manual but, briefly, may be thought of as the expected total return over the somewhat arbitrary expected holding period.
Liquidity is always a concern when trading preferred shares and these adjusments seek to perturb the calculation of "bidToOfferPickup" so that expected capital gains will be favoured when the size of the position is small relative to the trading volume (i.e., when it may be reasonably expected that the account will be able to exit the position without greatly affecting the price) while yield will be increasingly favoured as the size of the position relative to the trading volume increases.
"Penalties" are adjustments to the valuation used by the system which cannot logically be thought of as directly related to the expected total return. For example, the major penaltyComponent is optionDoubt, which increases proportionately to the degree of uncertainty in the maturity of the instrument (since each individual security is thought of as being a "portfolio" of instruments with known maturities, weighted in accordance with the probability of exercise of the associated option in the optionCalculationList.
There are many components to buyValuationAsk & sellValuationBid and it cannot be expected that each individual element will "agree" on the question of which instrument is the better value. Accordingly, the components of buyValuationAsk & sellValuationBid for a proposed trade are compared individually and, possibly, an allowance made for those elements which imply that a proposed trade is unfavourable. Thus, the "dissenting" elements are given a greater weight in trade determination than is normally the case.
The idea behind this adjustment is that we wish to favour trades with a greater degree of unanimity in their relative valuation - this may also be thought of as an attempt to apply distributed intelligence to the trading methodology. Greater the "disagreement" among the various elements requires a greater expected improvement in the portfolio before a trade is actually recommended.
It is not just a lack of unanimity that is a concern in any quantitative model: there is also a desire that a trade cannot be "forced" by a single variable that is so overwhelmingly favourably disposed to a trade that the other elements of valuation are effectively ignored. This adjustment effectively caps the contribution of any single element to the overall "bidToOfferPickup". When either side of the trade is "Cash" the value of this adjustment is defined as zero.
It seems intuitively obvious that we should not maximize our holdings of a particular instrument just because the "bidToOfferPickup" has barely exceeded its minimal favourable value. This adjustment seeks to ensure that, after the issue has been initially purchased for a portfolio, subsequent purchases must exceed a higher "hurdle" before being executed.
Friction is a major element in determining whether or not a trade should be executed. This adjustment accounts for commissions and capital gains taxes that will be paid should the trade be executed. Note that, if there should be a sufficiently large capital loss generated by the trade, this number may be negative and therefore actually "encourage" the execution of a trade.
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