INTERVIEW


From Sun Up To Sun Down
Investing Champion Mark D. Cook 

by John Sweeney


Mark D. Cook first won fame as a trader in 1989 when he finished second in the US Investing Championship. By 1992, he had shifted to options and racked up large three-digit percentage returns en route to winning the championship. Since then, he's turned to the Standard & Poor's 500 index and Nasdaq for daytrading, while keeping the options and stocks for intermediate- and longer-term trading. Nowadays, he's in the market to pay for his Ohio farm and his company's operating expenses, not to mention room and board. STOCKS & COMMODITIES Interim Editor John Sweeney caught up with Cook via telephone as winter was closing in on Ohio in December 2000.

ILLUSTRATION BY CARL GREEN

Let's start at the beginning. I really know very little about Mark D. Cook or Mark D. Cook Investments. What do you trade?
I've traded everything over the years. I started back in the 1970s. I actually started watching the stock market when I was in college in 1973. I just started studying and researching the market, and then in 1977 I got enough money together through farming to trade. In fact, my office is on my great-grandfather's farmstead. He came here in 1890, and we're still here -- the fifth generation of Cooks who have lived in this house. That's where my trading facility is now, and I changed the house into an office.
Back in the 1970s, all I traded was stocks. I started trading some equity options in the late 1970s, and through trading both stocks and equity options, my learning curve broadened immensely. Index options came out in the early 1980s and I thought that was great, because they were more market-sensitive and I could trade index options with more confidence than equity options. I started trading S&P futures as I increased my account equity size because they provided more leverage, for more bang for my buck. My career has spanned 24 years, during which I evolved from stocks to equity options to index options, and then to S&P futures, Nasdaq futures, and bond futures.

When you started trading, were you trading fundamentals? Were you trading company information? Economics? Technicals?
I started out with fundamentals, especially when I was studying the markets in college. I read numerous books, though, and I noted that the successful traders all used technical analysis and old chart patterns. My background in farming necessitated watching farm commodity prices. We raise grains, corn, oats, wheat, soybeans, and cattle. Those all had chart patterns, so I knew how to chart.

In the early days, the late 1970s, early 1980s, I got the Stock Option Guide chartbook every week and I charted approximately 30 stocks and select from those. That was the start of my evolution as a trader.

So you began trading stocks?
I bought my first stock in 1977. It was Columbia Pictures. I bought it because the movie Close Encounters Of The Third Kind was being released by Columbia, which is a purely fundamental reason to buy a stock. I bought it strictly on that -- a movie coming out that was supposed to be a box-office draw, which it was. I lucked out on that investment because Columbia Pictures was bought out. It was involved in a takeover situation that actually came to fruition before the movie's implications really hit the bottom line.

In the early 1980s I got really intrigued with options. I'm pretty good at math; I've always been interested in formulas, physics, and statistics. I took all those subjects in college, so figuring out strategies for options followed right in line with my interests and education. Every brokerage firm and wirehouse was promoting option strategies, so I always tried to figure out the premiums and what was priced cheaply or richly. As I always said, if they were willing to pay me Rolls Royce prices for a Yugo product, then I wanted to be on the receiving end of that! So I studied option premiums and mastered the pricing that determines valuation. Then I noticed that learning the premium valuation was great, but you needed to know the internals of the stock, the underlying security. That got me more into buying securities based on chart patterns and watching them.

All this was on a long time horizon. Back then, I would hold tradables for months. Then, as the years went by, I progressed into a shorter and shorter time frame.

So these days you're a daytrader?
I'm pretty well-known now on three fronts. I do my timing based on charting of a market that I think is oversold or overbought, and then I determine when to purchase or sell securities or something that's a longer-term investment. Second, I trade options, with each of the striking prices and the expirations for just the immediate month. I always put that into a time sequence or a finite period of one month. A 30-day time frame is about the max on options trading, down to about three days as a minimum time frame. My real short-term trading is the S&Ps and the Nasdaq futures. My futures trading is all daytrading, and it's my bread and butter.

I trade in all three areas, but each of them is segregated based on time frame. I have different objectives for different time horizons.

Are you actually involved in all three time frames?
Yes. It can be kind of tough to get in the mindset of looking at each investment in its own time frame and say, okay, I'm looking at this over a broader time horizon, where you don't get the fits and spurts or the roller-coaster rides that shake you out. The intermediate term is mainly predicated on option strategies based on premium evaluations for the current expiring month. For the short-term or daytrading horizon, I mostly use what I learned from friends and acquaintances as well as what I read by people like floor traders, who are down there scalpingÝ on the floor. That's how they make their living.

...Continued in the March 2001 issue of Technical Analysis of STOCKS & COMMODITIES


If you had to have one ingredient to succeed as a daytrader, I would say you had better be a competitor rather than someone who goes along with the crowd. -- Mark D. Cook

Excerpted from an article originally published in the March 2001 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2001, Technical Analysis, Inc.


Return to March 2001 Contents