HL Camp & Company

Frequently Asked Questions

What is Program Trading?
The media talks about program buying or program selling constantly.  CNBC lists Fair Value and program trading buy/sell levels every day.  Exactly what is program trading?

Program trading is a generic term used to describe a type of trading in securities, usually consisting of stocks traded on the New York Stock Exchange and their corresponding options traded on the Chicago Board Options Exchange and/or the American Stock Exchange; and, the Standard & Poor's 500 Index commodity contract traded on the Chicago Mercantile Exchange. The trading of these items is based purely on their price in relation to each other on a predetermined basis; and not, on any fundamental reason such as an individual company's earnings, dividends, or growth prospects; or, on any overall economic reasons such as interest rate movements, currency fluctuations, or governmental or political actions.  There are different types of program trading that we will describe later along with how you can benefit from the different types.  According to the New York Stock Exchange, program trading accounts for about 45% of the trading volume on that exchange every day.
 
 

What is Fair Value and what are Premium Execution Levels?
The media also talks about Fair Value constantly and the "premium" or "spread" and certain execution levels.   What are they talking about?

The "premium" (PREM) or "spread" is the difference between the most active S&P 500 Stock Index Futures Contract (the spoos) minus the actual S&P 500 Stock Index (cash).  That difference, which usually ranges between $5.00 to $-5.00, and slowly decays or rises as we reach the S&P 500 Futures Contract expiration, is what program trading is based on.  When the PREM difference rises to a certain execution level, "buy" programs kick in.  Our large institutional clients then buy the stocks in the S&P 500 Stock Index on the New York Stock Exchange and sell the S&P 500 Stock Index Futures Contract against those positions on the Chicago Mercantile Exchange.  When the PREM difference drops to a certain execution level, "sell" programs kick in and our clients do the exact opposite.   These transactions have extremely low risks because of the abnormal market differences in the PREM as traders capture those few points of profit before the PREM returns to normal and/or Fair Value.  This type of program trading is called index arbitrage and is very common.  But it usually accounts for less than 10% of all program trading activity done each day.
 
 

What about your Program Trading Research?
What does Fair Value and PREM execution levels have to do with your firm and your research?

Our Program Trading Research is designed to tell you in advance when the PREM will reach the high and low points of the day.  By knowing this in advance, you can fine tune your trading to take advantage of these abnormal market situations just like the big program trading firms do.  However, our projections are just that and no matter how accurate they have been in the past, there is no guarantee that they will continue to be accurate in the future and hit at an exact projected time.  Neither can we guarantee that by knowing what the PREM will do in advance, that you will not have loses with your trading.  Please click here for additional warnings on program trading strategies.
 
 

How do you do it?
I've seen your projections and it amazes me how you guys can predict in advance which way program trading will move the markets and the actual time it will happen each day.

You're right.  And that is exactly how we felt when we discovered our program trading pattern recognition and time and direction projections during 1983 and 1984.  We track every single trade in the S&P 500 Stock Index Futures Contracts, the S&P 500 Stock Index, and the PREM every minute of every market day.  We have since Wednesday, April 21, 1982, the day that the S&P 500 Stock Index Futures Contract began trading on the CME.  Each time that movement in the PREM creates a "buy" program or a "sell" program we track the corresponding up or down move in the Dow Jones Industrial Average, the 30 stocks in that average, the S&P 500 Stock Index, and the 500 stocks in that index, to see if buy or sell programs actually moved the Dow 25 points or more, and exactly what stocks in the averages moved the most.  If so, our computers log that exact time of day and keep a file of those times for us automatically.  We group those exact times into the 81 five minute time intervals or blocks that constitute a trading day.  If the Dow does not move, we then ignore that PREM movement no matter what the media says.  Many times, novice journalists blame program trading for a move in the Dow; when, in fact, programs were not present nor did they affect the Dow or the other markets at all.

By knowing the exact times that program buying or selling has moved the Dow Jones Industrial Average and the S&P 500 Stock Index in the past, we are able to project into the future at what times program buying and program selling is most likely to happen tomorrow.  Additionally; by know exactly what stocks have moved the most within those indexes during a buy or sell program in the past, we are able to project into the future exactly which stocks within those indexes will move the most tomorrow.  However, our projections are just that and no matter how accurate they have been in the past there is no guarantee that they will be accurate again in the future at an exact projected time.  Most days have 5 or 6 projected times that the Dow and S&P 500 should move but some days some of those times may not be relevant. Our standard deviation is about 6 minutes.
 
 

What happens when you are wrong?
I've seen your projections and the times given that program trading will hit the market, but then nothing happens.  Does that make you wrong?

Yes and no. The projected times given, usually five or six times a day, in some cases do not move the Dow or the S&P 500. Usually the spread rises or drops to the high or low of the day near these times but without any follow through and therefore no programs hit to move the markets.  So in that sense we are wrong.  But by using the projected times any way even if the results are not perfect on every time given, we limit our exposure to losses. For example, if we expect program selling at around 10:35 and we expect to go long or buy calls at that time, and the spread narrows but no programs hit to drive the Dow down for us, what have we lost?  Nothing.  We simply do not buy at this projected time and wait for another entry point. So yes, we were wrong, but no, we did not lose on this type of hypothetical trade.
 
 

What about trading the S&P?
"I day trade the S&P.  How can I use your research effectively?"

By studying our Program Trading S&P Report, you will know in advance which way program trading will move the markets and at the most logical time of day it will happen.  Then you can take a position in the S&P near those times.  For example, if our computers project the PREM low for the day at 10:35 and the PREM high for the day at 1:55, then you have a game plan for trading the S&P on that day.  We find that our research is reliable and that trading the S&P with our research can be a very beneficial.  But we cannot guarantee that you will be profitable, or that you will not have losses. Click here for additional warnings about that.
 
 

What about trading the E-mini?
I trade the E-mini. The margin is less and I am more comfortable with it. How does that work with your service?

The E-mini contract is 1/5th of the S&P.  You can use our Program Trading S&P Report to trade the e-mini too.  Once you have built up your equity, you can switch to the other contract if you like.  But remember, just because the E-mini contract is 1/5th of the spoos, does not mean that it is safer or not as risky.  The E-mini is more liquid though and very fast to trade.  And, in our opinion, is the future for your trading.  In the next few years more and more traders will be switching to the E-mini contract for this liquidity and ease of trading electronically.  It is already the most active trading vehicle in the world.  See below about the widening spreads in OEX put and call options and the resulting move of those traders to the E-mini.
 
 

What about trading the Dow?
I trade the Dow Jones contract.  The margin is less and I am more comfortable with it. How does that work with your service?

Very well.  We were contracted by certain future market makers in the Dow contract before its debut on the CBOT.  We were consulted about the possibilities of index arbitrage in this contact with the stocks in the Dow Jones Industrial Average.  All of that experience is readily available each day for you and your trading.  You can use our Program Trading S&P Report to day trade the Dow contract.  But, the Dow contract is very slow, compared to the S&P or E-mini.  And it is not very liquid.  So once you have built up your equity, you can switch to the S&P if you like.  Program trading is based on the S&P.  And most traders eventually switch to the S&P as their comfort level increases since the S & P's are more liquid and have better fills.  In the meantime, you should take a close look at trading the E-mini.
 
 

What about trading the OEX?
I trade puts and calls on the OEX.  How can I use your service with option trading?

We have traded OEX options since they were invented. In fact, we traded listed calls before puts were invented. All of that experience is readily available each day for you and your trading. We have built one of the best reputations on the street for our options expiration week projections alone.   But that type of trading is only for people that can afford to lose.  And there is no way we can guarantee that you will not have loses trading options.  Why?  Because, as you know, options are the hardest thing in the world to trade. They make the S&P look easy by comparison.  In the example above, we would recommend buying calls (always in the money) during program selling at 10:35 and then sell them during program buying at 1:55.  Our clients tell us that by fine tuning their trades this way they can sometimes get very close to the low or high price of the day.  One secret you need to know is that the bid and offers you see for your OEX options are based not on what the OEX is doing, but on what the S&P 500 Stock Index Futures Contract (the spoos) is doing.  Buy using our Program Trading S&P Report, you can know what the S&P and therefore your OEX options are going to do and when they will do it.  In recent years many traders have switched from OEX options to the E-mini contract, since the E-mini is more liquid and easier to trade electronically.   With wider spreads in options and less and less volume, that trend continues in 2004 with more and more traders moving away from options altogether.   Remember that OEX options are securities and cleared by stock brokerage firms.  Moving to the E-mini requires a new broker.  And a commodity futures clearing firm.
 
 

What about trading stocks?
"I trade stocks because I've tried options and lost and commodities scare me.  How can I use your research to trade stocks?

The same way specialists do on the floor of the NYSE, and NASDAQ market makers do on Level III. We track every stock in the Dow Jones Industrial Average, the S&P 500 Stock Index, the S&P 100 Stock Index, and the NASDAQ 100 Stock Index.  Each night we project every stock's theoretical high and low for the next day along with the projected high with program buying and the projected low with program selling.  This information, our Program Trading Stock Report, is sent to our clients on the NYSE that are specialists in those stocks and to certain NASDAQ Market Makers on Level III.  Isn't it about time you knew in advance what the specialists and the market makers in the stocks you are trading already know?  Surely that information coupled with the exact time of the day that those prices should hit would help you.  Our clients tell us that they consistently hit near the high or low of the day and pull an extra 3/8 to 7/8 out of their stock trades.  In addition, many clients use our information to set stop losses in positions that they hold overnight, knowing that the specialists and market makers would have taken them out of the trade if they had set an incorrect stop by themselves.  We have not independently verified these claims from our clients.  Nor can we guarantee that you will have the same result with your own trades or that you will not have losses.  Please click here for more information about that.
 
 

What about just letting you trade for me?
"There is no way I can watch the markets every day.  I need someone to help with my investments.  Do you handle managed accounts?"

No.  We do not accept nor solicit money from the general public.  We are not registered with the United States Securities and Exchange Commission as Investment Advisors.  We are not registered with the United States Commodity Futures Trading Commission as Commodity Trading Advisors, nor do we advertise or hold ourselves out to the general public as such. 

 

What about your firm and patterntrading.com?
"Ok, I'm convinced that you guys know what you're doing.  So I went to the internet to check out program trading and fair value.   I got a report off of a search engine listing patterntrading.com too.   Their site looks like a copy of yours.   What is that all about?"

In 1997, Donald W. Spinks of Mansfield, Texas, also known as Don Spinks, was investigated by the Ft. Worth, Texas office of the United States Securities and Exchange Commission (SEC).  A copy of the SEC Order to Cease and Desist is available for you to read by clicking here:

http://edgar.sec.gov/litigation/admin/3438510.txt

The SEC permanently barred Spinks from association with any broker, dealer, municipal securities dealer, investment adviser or investment company.   

Don Spinks copied our web site without our permission in order to form his own web site.  Larry Novell Kinney of Apollo Beach, Florida (NFA #0298073) acted as a front man for Don Spinks on their web site.   Larry Kinney filed for registration with the United States Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA) in an attempt to register as a trading advisor outside the jurisdiction of the SEC. Upon discovery, the NFA withdrew Larry  Kinney's registration.

If you would like further information regarding the above mentioned action by the SEC and the NFA, please email us your requests and we will forward to you the names of the individuals involved that represented the SEC and NFA in this case for reference.

 

What about your firm and the SEC?
"Ok, I'm convinced that you guys know what you're doing.  So I went to the internet to check out HL Camp & Co.   I got a report off of a search engine listing the Securities & Exchange Commission too.   What is that all about?"

In July 1995, H.L. Camp & Company, Inc., a Tennessee corporation and a registered Broker/Dealer (NASD #17005) with the United States Securities and Exchange Commission (SEC) and the National Association of Securities Dealers, Inc. (NASD), was sold to Bernard Zelenka of Shelbyville, Tennessee doing business as Summit Financial, Inc.  In August 1995, Camp  discovered some irregularities in a few customer statements of his former firm.  He reported these irregularities to the NASD District 6 office in New Orleans, and to the SEC in Atlanta.  The NASD investigated the irregularities and the SEC closed Bernard Zelenka and Summit Financial.  A copy of the court order is available for you to read by clicking here:

  http://edgar.sec.gov/litigation/litreleases/lr15489.txt 

Obviously these activities by Zelenka had nothing to do with our firm.  However, the fact still remains that Zelenka used our firm's name with his illegal activities.  And that is an great embarrassment to us.  If you would like further information regarding the above mentioned action by the SEC and the NASD, please email us your requests and we will forward to you the names of the individuals involved that represented the regulatory agencies in this case for reference.