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Strategies & Market Trends : Stock Attack -- A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Chris who wrote (6635)	3/7/1998 2:18:00 AM
From: Robert Graham	Read Replies (3) \| Respond to of 42787

I have been reading an interesting book called "Method in Dealing Stocks: Reading the Mind of the Market on a Daily Basis" by Joseph Kerr. This is a text that was written in the 1930's and updated by the hedge fund manager Larry Connors. This book attempts to show the reader how to look at the market in a way that can help you determine where the "insiders" stand and where the "public" stands. It also discusses the effects of investor money and the professional trader in the market. The downside of this book is it attempts to formulize much of what it talks about, as though its subject material can be treated on a scientific basis in terms of rigid structural relationships. This also makes for more difficult reading. But the book does provide worthwhile insights. Larry Connors considers this book his "trading bible". I can see where the discussion presented in this book can lead nicely into a reading of the book by Rollo Tape (David Wykoff) titled "Studies in Tape Reading". Some of the same views of the market is covered in this book on tape reading. This is where for instance the book gets into the discussion of breaking the market up into its components of primary leaders, secondary leaders, and specialty leaders. Also it shows how to differentiate between the public interets and the "insider" interests in terms of their effects on market action. I have also received a book called "Option Market Making" by Allen Baird. A brief scan of this book indicates that it covers options from the floor trader's and market maker's perspective. It focuses on risk management and the strategies that can be utilized by the market maker in managing this risk, including the trading of synthetics and consepts and models used by the market maker in risk determination which allows them to make trading decisions that also involve managing their hedged positions. The downside to this book is that it covers options that pertain to underlying future contracts. But I see where much of this can apply to options on stocks. This is an advanced book on options that covers concepts like: volitility skew, box arbitrage, trading fences, delta neutral trading and gamma trading, being "long" or "short" volitility, and so forth. Esoteric stuff indeed, but evidently necissary for the MM to manage his position effectively. In a practical sense, this book gives some clues and techniques used by MMs in managing particular situations like taking the other side of a barrage of one sided orders and how they handle the risk during option expiration and still remain solvent. For instance the market maker's use of ratio plays and synthetic positions as a hedge are discussed. Also there are some of the more basic option strategies covered that I was not aware of like the "condor" and the "wrangle". I do think it is much more complicated being an option MM than it is being a MM in stocks. The book covers all of this in 200 pages. Bob Graham