CNBC Million Dollar Portfolio Challenge - Kicking Off Monday

If you haven't registered yet, and if you enjoy playing with fictional money for an opportunity to win a heap of actual money, there's still time.

Trading starts Monday, as will an at-least-daily series of posts here.  Last year, we did some Portfolio Challenge posting, but it was sporadic.  This year, in addition to general contest commentary, news, and trading ideas, we'll be putting up the answers to the daily trivia questions and the weekly bonus quiz (good for thousands of fake dollars/day), shortly after the questions are released.

For those who may have played or observed last year, there are a few notable changes this year, some good, some bad.  To recap, last year, it was a 10-week contest, during which you could re-allocate your portfolio however you want, once per day, among publicly traded stocks with a minimum market cap of $500 million.  Every week, the biggest percentage gainer would win $10,000.  At the end of the 10 weeks, the 10 highest aggregate gainers over the whole contest, as well as the 10 weekly winners, would have their portfolio values reset and compete in a final round.  Whichever of the 20 finalists put up the best performance in that round won the million dollars.

A huge flaw in the game presented itself almost immediately, when many traders (including myself) registered hundreds and even thousands of portfolios.  CNBC required only that a unique email address was used for each.  If you had control of a domain name through which you could register thousands of email aliases or forwarding accounts, it was easy enough to create as many portfolios as you cared to.  One such trader (one Nancy Beaumont) wound up winning the first weekly prize, but it was clear to other traders that she had multiple portfolios because at one point, she'd occupied several slots on the leaderboard.  The contest admins deliberated and ultimately ruled that multiple portfolios were not forbidden by the rules, which is when I got busy creating my thousand or so accounts (yes, I waited until they ruled in kosher).  Nancy's win was upheld (though they also gave a weekly prize to the single-portfolio trader who would've won that week) and the game continued.

This year, it's explicitly forbidden to trade under multiple accounts (don't try it - I guarantee they'll look for this, given how much of a mess it caused last year, and you'll get booted).  But they are allowing each manager to register up to 5 portfolios under a single account.

(This is a huge relief.  I really wasn't looking forward to the countless hours it takes to reallocate hundreds of portfolios every day through what was a frequently maddeningly slow web site.)

Another big change this year is the introduction of currency trading in addition to equity trading.  I'm not thrilled with this, only because currency trading is in no way my bag.  If they were going to expand the trading realm, why not the more logical (and requested) extensions like enabling short selling or options trading?  The cynic in me wonders whether they're just trying to create demand for their new online currency trading educational series.  The allocation is 90% equities, 10% currencies and the respective money (its virtualness notwithstanding) is not fungible, so you can't transfer from one to the other.

The prize structure has also changed (for better or worse, depending on how well you plan on doing).  Instead of the winner getting all $1 million, the pot is split 6 ways:

1. $500,000
2. $250,000
3. $100,000
4. $50,000
5. $50,000
6. $50,000

And instead of the weekly winners getting $10,000, they get an assortment of fabulous merchandise and travel packages (r.g. home theater, watches, Superbowl trip, various beach and golf getaways, a seat at the 2009 World Series of Poker) with approximate retail values of $5,000-$32,500.

There's also no final round - your eligibility for a share in the million dollars is based solely on the value of your portfolio at the end of the 10 week contest.  So there's a lot less incentive to shoot the moon in an attempt to win the weekly contest and an automatic bid in the final round.  Of course the multiple account prohibition ought to take care of most of the moon-shooting that plagued last year's contest (my preferred, occasionally successful moonshot method having been to allocate 100% of each portfolio to one of a handful of companies reporting earnings the next day (i.e. stocks likely to have big one-day moves), then take the batch with the best return and repeat on Tuesday, and so on throughout the week, leaving the hundreds of losers to languish since all portfolios would effectively reset each week if you were gunning for a weekly winner's pass to the final; worked well enough to get me on the leaderboard once or twice, but alas, never well enough to hold the top spot).  The elimination of the finals round, and thus rendering the weekly prize that much less valuable, should further improve the gameplay (assuming good gameplay means approximation of rational real-world trading strategies).

So... that's about it, other than all the things I'm missing.

Trading begins on Monday (May 12th) at 9:30 am.  No need to get starting line jitters though.  Like last year, portfolios are only reallocated once per day.  So any trades you submit will get processed at 4:00 pm Eastern at that day's closing price.  (If you submit a trade after 4:00, it gets processed the next day at 4:00 at the next day's closing price).  Bear in mind, this means the first trading session your portfolio will actually be exposed to is Tuesday, May 13, since trades placed immediately after the contest starts Monday morning won't execute until the closing bell.

Make sure you've got your account set up and all 5 portfolios activated, read through the rules to remedy whatever I got wrong, marvel at the spinning sign guy, and check back here over the weekend for some Day 1 trading thoughts.

Once we're into the first day of trading, we'll be able to put up a more specific schedule of the time each day that we'll be posting the answers to the bonus questions.

Good luck!

Update: I've set up a new CNBC Portfolio Challenge category for handy archiving purposes.  All posts related to the contest will be accessible at that link.