55Prospectus, examination of, 232–233Pullback effect, 134, 145Put option:defined, 164double option, 217–219hedging, 217overview, 174, 175as stop-loss orders, 221Pyramided position, 200–201Questions & Answers about How You CanResolve a Commodity Market-RelatedDispute, 267Rate of return (ROR):CTA selection, 239–246, 250efficient frontier, 234in prospectus, 232–233Sharpe Ratio, 236 –237Rate-of-price-change technical analysis, 158,160
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Regulation 4.41(b)(1), Commodity FuturesTrading Commission (CFTC), 257Regulatory compliance, 210–211, 254 –255Relative strength index (RSI), 156–157, 159Republic National Bank of New York, 105Resistance to change, 132Responsiveness of broker, 52, 53Retracement formation, technical analysis,141–142Return move, 145Reuters, 203, 207Reversal formation, technical analysis,142–143Reverse crush spread, 182Rights in options, 174 –175Risk:arbitrage strategy, 213–214client suitability, 2– 3, 36 – 38consideration of, 44diversification, 41, 198, 199limited partnership management, 233limited risk, 258stop-loss orders, 199, 200, 221time value, option, 177–178tolerance for, 3 – 4Risk Disclosure Statement, 58Risky business, viiiRobusta coffee, 87– 88Roosevelt, Franklin D., 106Rosansky, Victor, 228Round bottom, technical analysis, 134 –135RSI (relative strength index), 156–157,159Rule 2-29, National Futures Association(NFA), 255–259Russell 2000 Index, 42, 43, 113, 115
Scheduling and tracking, 202–204Schwab1000 index futures, 113Seasonality:cattle, 82– 83cocoa, 93coffee, 88– 89copper, 109cotton, 100hogs and pork bellies, 79oats, 75orange juice, 96petroleum, 111–112structural analysis, 154
277
SEC (Securities and ExchangeCommission), 247, 268Securities and Exchange Commission(SEC), 247, 268Self-fulfilling policy, technical analysis as,126 –127Self-knowledge and trading success, 5Sell plus and sell minus order formulas, 47Sharpe, William R., 227Sharpe Ratio, 236 –237, 239 –240Short position, 13, 14, 134, 174, 216Short straddle, 186, 187–188Short strangle straddle, 189–190Silver market overview, 100–103SIMEX (Singapore International MonetaryExchange), 222Simple moving average, 151–153Singapore Commodity Exchange, 222Singapore International MonetaryExchange (SIMEX), 222Single-currency accounting, 211–212Small vs. large traders, 42– 43Smithsonian Agreement, 118Sole proprietorship accounts, 55Soybeans market overview, 66– 68S&P 500 Index, 42, 43, 43, 44, 46, 113, 115Special double option, 217–219Speculation, 22, viiiSpiked top and bottom formation, technicalanalysis, 136 –137Spreading strategies, options, 44, 181–183,201, 216 –217Stags, 77Standard and Poor’s 400 MidCap, 113Standard and Poor’s Index, 42, 43, 43, 44,46, 113Standard and Poor’s SmallCap 600, 113Standardization of futures contracts, 20,21–22Staple, cotton, 98Steer, 80Sterling Ratio, 237–238, 239Stock index futures, 41–43, 113–116, 221–223Stock market risk, 114Stop limit orders, 61, 62Stop orders, 59– 60, 62Stop-loss orders, 199, 200, 221Stopped out of the market, 60Straddle strategies, 185–191Strangle straddle, 188–191Strategies (See Trading strategies)
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Strike price, 163, 164, 191, 192Structural analysis, 127–128, 154 –156Success:brain and behavior, 33– 34obstacles to, 6 –11personal attributes of, 4– 6Sugar market overview, 83– 84Supply:cattle, 81cocoa, 90 – 92coffee, 88copper, 107–108corn, 69 –70cotton, 97– 98as fundamental, 23in fundamental analysis, 123–124gold, 104 –105hogs and pork bellies, 77–78oats, 74orange juice, 95petroleum, 111silver, 101soybean, 66 – 67wheat, 72Support and resistance level formation,technical analysis, 139–141Sweetners, nonnutritive, 84Symmetrical triangle formation, 148–149Synthetic long and short strategy, 191–193
“T” list, broker selection, 53T3 settlement, 211Takers, 173Taxes, Gann advice on trading, 200Technical factors and analysis:approaches to, 127bear market, 31– 32bull market, 29 – 31cattle, 83defined, 126gold, 106 –107historical patterns, 126–128hogs and pork bellies, 79– 80interest rates, 118inventory manager role, 24moving averages, 151–154signals and chart formations, 128–151silver, 103soybean, 67– 68
INDEX
Technical factors and analysis (Cont.):sugar, 86wheat, 73Third-party controller, 229–231, 258TIA (time-interval analysis), 245–246Tick-by-tick prices, 205Time limit orders, 61, 62Time options, 183Time value analysis, 177–178, 241–242Time-interval analysis (TIA), 245–246Timing of trades, inventory manager role, 24TOPS (Trade Order Processing System), 208Track record:broker selection, 54commissions, 264–265National Futures Associationrequirements, 257–259Trade Order Processing System (TOPS),208Trader’s notes:cattle, 83cocoa, 94coffee, 90copper, 109–110cotton, 100foreign currency, 122hogs and pork bellies, 79– 80oats, 76orange juice, 96– 97petroleum, 112–113stock index futures, 115 –116Trading issues:back-office procedures, 211broker selection, 54brokers, 209 –210call-up information, 206data location, 207development of, 195–196electronic trading demands, 210exchanges, 208–209historical data, 206 –207information management, 204–207liquidity, dangers of, 196–197money management and analysis,197–202online data classes, 205–206planning, 36– 39, 180 –181portfolio selection, 29, 39– 43regulatory compliance, 210–211scheduling and tracking, 202–204
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Trading issues (Cont.):single- and multiple-currencyaccounting, 211–212success in, 5Trading strategies:analysis system, choosing, 196arbitrage strategy, 213–215day trading, 223 –225hedging, 219 –221night markets, 221–223puts as stop-loss orders, 221special double option, 217–219stock index futures, 114 –115teamed futures and options, 215–217teamed put and call, 217(See also Bear market; Bull market; Hedging)Trailing stop order, 60Transaction costs, 258Transfer Form, 58Treasury securities futures, 209Trend analysis:defined, viiiGann’s advice, 199technical analysis approach, 127–128trend lines, 129–134Triangle formation, technical analysis,147–149Trust accounts, 56Tulip bulbs, 85
Unabled order, 63Uncovered options, 175United States Postal Service, ChiefInspector of the, 267Universal Broker Stations (CUBSII), 208Upland cotton, 98Uptrend (see Bull market)U.S. Department of Agriculture (USDA):cattle, 82Cattle on Feed Reports (USDA), 82cotton, 99 –100hog, 78oats, 74, 75production and usage projections, 68U.S. Department of Commerce, 117U.S. Treasury securities, 209USDA [see U.S. Department of Agriculture(USDA)]Utility and risk attitude, 4
279
Value Added Monthly Index (VAMI),235 –236, 241, 245Value Line Composite Index, 113Value Line index futures, 42, 43, 44, 115VAMI (Value Added Monthly Index),235 –236, 241, 245Vintila, Nick, 244, 245Volatility:measurement, 234–236milking stool analogy, 244–245option price influence of, 178program trading, 46– 47spreads, 182–183stocks, 114Volume:activity benchmark, 160 –162herd psychology, 130–131interrelationship with price and interestrates, 162resistance levels, 139–140technical analysis, 144–146as trend indicator, 132–133
The Wall Street Journal, 160, 170Wasendorf Trading System (WTS), 40,235Weather effects (see Price determinants)Web, the (see Online services)Weighted moving average, 153–154Wharton School of Business, 125Wheat market overview, 71–73Whitney, Eli, 97Wilder, J. Welles Jr., 157–158, 159Williams, Larry R., 157Wilshire 4500 index futures, 113Wilshire 5000 index futures, 113Withdrawals, impact of, 242–243Writers,options, 165–166, 174 –175Written records of trading plan, 36– 39WTS (Wasendorf Trading System), 40,235
Yahoo, 207Yearling (cattle), 80
Zero-based market, ixZumbrunn, John, 228
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A U T H O R
Russell R. Wasendorf, Sr., is chairman and chief executive officerof Peregrine Financial Group, Inc., a futures commission merchantin Chicago. He also heads Wasendorf & Associations, Inc., a research firm specializing in managed futures investment, and is president of Wasendorf & Son Company. Wasendorf is the author orcoauthor of five books: Commodity Trading—The Essential Primer, Allabout Futures, All about Options, All about Commodities, and ForeignCurrency Trading.Since 1980, Wasendorf has written and published the marketletter Futures and Options Factors, which was ranked as the numberone newsletter in 1997 by Commodity Traders Consumers Reports. Heis also the founder of the Center for Futures Education, and is a former director of the Commodity Education Institute.
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