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.
