. development, 301-302Oscillator(s), see Momentum, MovingaverageOut-of-the money option, 265, 283,291Overbought/oversold, 122, 125, 126,347Overvalue, 218
PPaper feedlot, 194-195, see alsoSpreadsParabolic system, 127Perishable spread, 189-190Physicalsfinancials comparison, 276futures comparison, 276Point-and-figure see ChartsPosition trader, 7Positive carry, 219Prefunding, 249Premium, 213-215, 264, 268, 270, 348Price(s), 9, 11, 85-93, 280change, 9channel, 127discovery, 9forecasting, 143-145, see alsoHedginglimits, 5-6see also Fundamental analysisProbability, 50-51Profitmargin, 280objective, 59
Puts and calls, 280-282, 284-285, 333,349
RRandom walk theory, 144-145Range leader, 128Rate of change, 128Ratios, 99, 131Regression analysis, 259Relative risk, 229Relative strength index, 120, 128, 130Return on investment (ROI), 291-292,see also ProfitReturn/risk ratio, 39Reversal, 109, see also KeyRisk, 9, 23, 48, 52, 147-148, 247-248,280-281absolute/price, 229avoidance, 151exposure, 236-238relative/basis, 229ruin, 52-54shifting, 9ROI, see Return on investmentRoll yield, 44RSI, see Relative strength index
SS&P 500, see Standard & Poor’s 500SAR, see Stop and reverse price pointScale order see OrderScatter diagram, 103SDR, see Special drawing rightsSearch costs, 9
364
Index
Seasonalmovements, 96-97patterns, 142-143Seasonality, 62-63, 96-97Securities Exchange Act, 3Segmentation, 10Selective hedge, 151Sell order, 79, see also OrdersSelling, 6short, 6Sharpe ratio, 35-36, 37-38, 45Short hedge, 344, 351cattle, 168-170Sizeof market, 4of accounts,7Software, see ComputersSpecial drawing rights, 211Speculators, 7, 21-24, 351Spot market, 210, 352Spread(s), 2, 228, 185-198, 352and taxes, 196guidelines, 197-198inter-commodity, 191location basis, 190profits, 188-189tracking, 191-192trading strategy, 192see also Crack spread, Perishablespread, TED spread, Three-wayspreadStandard & Poor’s 500, 6, 254Standard deviation, 274Statistical measures, 121
Statistical Techniques, 99-104, seealso Ratios, Moving Averages,Index numbers, Correlation, DataanalysisStochastic, 129, 130Stock(s), 253circuit breakers, 256-257Crash of 1987, 16-17, 256exchanges, 1index computing, 255index futures, 253-261index options, 261vs. bonds, 11Stopand reverse price point, 127loss order, 268, 352order, 60-61Storage hedge, 173-175Straddle, see SpreadsStrip (yield) curve, 223-224Supply and demand, 87-90, 143Synthetics, creation, 277-278
TT-bill, see U.S. Treasury BillT-bond, see U.S. Treasury BondTax and Revenue Act, 195-196Tax(es), 196-197losses, 196-197strategy, 153-155Technicalanalysis, 105-120indicators, 123-130tools, 121-137trader, 56-57
365
Index
Technician, 143-144vs. fundamentalist, 143-144TED spread, 228Theta, 267Three-way spread, 194-195Time, 5, 275cycles, 131spreads, 187-188Trade Advantage, 57-60calculation, 57-61exit, 60-61Traders,motivation, 22pitfalls, 24profile, 8types, 7, see also Hedgers,SpeculatorsTrades, execution, 321-322Trading, 25, 27, 47bands, 124floor, 321, 340philosophy, 55, 56-57plan, 25, 47-69elements, 48-49, 63scorecard, 327-330worksheet, 65-69positions, 55-57practice, 25results, 61volume, 139-143definition, 139information sources, 141seasonal patterns, 142-143where to begin, 27-28Trading Advisor Qualified Index, 29
Trends, 99, 112-114, see also ChartsTurning points, 122
UU.S. Department of Agriculture,6, 90-91U.S. Department of Commerce,6, 90-91U.S. Government information,92-93U.S. Government Printing Office, 91U.S. Treasury, 6U.S. Treasury Bill(s), 12, 225-234,353-354futures contracts, 226-227U.S. Treasury Bond(s), 230-231U.S. Treasury Note(s), 231-232Undercapitalization, 24Undervalue, 218
VValue Line Average (VLA), 253Vega, 266-267Volatility, 124, 130-131, 274-275
YYield curve, 217-224and futures market, 221-223purpose, 218-219shape, 219-221strip, 223-224
ZZero-coupon bond, 31366
About the Author
Mark Powers is one of the futures industry’s most respected and influential figures. A key participant in drafting many of the original contract specifications fortrading currency and financial derivatives, Powers is the CEO of Powers and DubinAsset Allocation and Management and former editor of The Journal of FuturesMarkets. He also served as chief economist for the Commodity Futures TradingCommission and has contributed his expertise as a director on numerous futuresexchanges.
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