Create Your Own Hedge Fund: Increase Profits and Reduce Risks with ETFs and Options
$21.20
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| Format |
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| Pages |
253 |
| Published Date |
2005 |
Create Your Own Hedge Fund explains how exchange-traded funds can be used in conjunction with an options strategy to attain steady growth. Beginning with a tutorial on options and ETFs, the book goes on to describe both investment approaches in great detail providing you with a trading strategy that generates higher returns than buy-and-hold investing — and allows you to reduce risk by adopting a hedging strategy. Filled with in-depth insights and expert advice, this book is intended for you if you’re a sophisticated individual investor or a professional investor, trader, or other money manager looking to update your arsenal of investment tools.
Introduction:
Investing is not a game. It’s a project that must be taken seriously, as your future financial independence is at stake. It requires an understanding of the risks and rewards of investing. Successful individual investors who make their own decisions devote a great deal of time and effort to avoid making bad decisions. Some spend countless hours poring over annual reports and 10-k filings in an effort to find companies that have the potential to earn great profits in the future (fundamental analysis). Others spend time with charts and graphs, attempting to use price and volume data to predict future stock prices (technical analysis). If you follow the methods taught here, you can be spared those hours of research. Individuals, on average, are not able to find those great companies, and unless you have a proven track record of consistently outperforming the stock market averages, it’s less risky to own a diversified portfolio, such as those represented by ETFs. Those investments can be hedged with options, reducing risk even further.
The methodology taught in this book does not guarantee profits. But it does present an investing strategy that increases your chances of being a successful investor. It increases the odds that your portfolio outperforms the market averages on a consistent basis, and it reduces your overall investment risk. Those are not just idle claims, and statistical evidence is included to support those claims. The path to investment success discussed in this book uses neither fundamental nor technical analysis. The recommended strategy is one that you, an individual investor, can readily adopt for yourself.
That investment method involves:
- Asset allocation: Determine the portion of your assets to be invested in the stock market and in other asset classes, such as bonds, cash equivalents, real estate, collectibles, and so forth. The methods discussed here are limited to working with the funds allocated to investing in the stock markets of the world.
- Diversification: Using the teachings of modern portfolio theory, you build a portfolio of stock market investments. Building an appropriate, diversified portfolio (diversification reduces risk) is much easier to accomplish than you might believe. You’ll learn to use the modern version of the traditional mutual fund, the exchange traded fund, as the back-bone of your portfolio.
- Stock options: We’ll explode the myth that options are dangerous. This versatile investment tool can be used conservatively and intelligently to enhance the performance of your stock market portfolio. You’ll learn to adopt an easy-to-understand options strategy that both enhances performance and reduces risk even further.
Contents:
- Modern Portfolio Theory
- Can You Beat the Market? Should You Try?
- Hedge Funds
- A Brief History of Mutual Funds and Exchange Traded Funds
- Traditional Mutual Funds
- Exchange Traded Funds
- What Is an Option and How Does an Option Work?
- More Options Basics
- Why Investors Buy and Sell Options
- Option Strategies You Can Use to Make Money: Covered Call Writing
- Option Strategies You Can Use to Make Money: Uncovered Put Writing
- Historical Data: BuyWrite Index and Volatility Index
- Building a Portfolio
- Finding Your Style: Choosing an Option to Write
- Covered Call Writing in Action: A Year of Trading
- Uncovered Put Writing in Action
- Odds and Ends and Conclusion
Create Your Own Hedge Fund: Increase Profits and Reduce Risks with ETFs and Options By Mark D. Wolfinger pdf
9 reviews for Create Your Own Hedge Fund: Increase Profits and Reduce Risks with ETFs and Options
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Braylen Dyer (verified owner) –
This is a fantastic book and I look forward to implementing the idea of the author.
Messiah Wade (verified owner) –
In short, the book’s claim is to buy an ETF with a stock index and other financial instruments (such as the Nikkei average of 225) and sell a call option for the same index.That way, you get the option premium, and even if the price rises and the call option is exercised, the ETF earthenings cover it.However, if the index goes up significantly, you only get the premium of the call option, and vice versa, if the index drops significantly, you get the premium of the call option, but you can get more losses in the ETFThis is a scheme that will lose if the stock price does not rise in the end.I think there is a danger if you are not a professional like a hedge fund. (Even a professional is dangerous)
Estrella McCann (verified owner) –
This book covers the basics of this strategy very well; however it contains way too much filler information, and not enough substance. The author treats the reader as a novice to the market; but in reality no stock market novice would even begin to understand this strategy – therefore the author misses his target audience!
In my opinion, it is good entry entry-level reading for the market beginner who wants to understand the basics of a hedge fund; however it is not for the seasoned trader demanding greater insight in to a leading-edge strategy.
Dilan Castillo (verified owner) –
The title to this book is misleading at best.
I picked up this book looking for anything relating to creating or running a hedge fund. It doesn’t contain any such information.
This book contains basic information about investing, with most of the information revolving around ETFs and some information about options.
Isabel Conrad (verified owner) –
The market has always intrigued me. However, following the advice of well meaning, financially secure friends never brought me the success I sought. It turns out that it’s much harder to pick winning stocks than I expected. Even the mutual funds I owned were disappointing. “Create Your Own Hedge Fund” really opened my eyes with insight and clear step-by-step guidance in teaching me a profitable, yet safer, way to invest.
The best two skills I gained from this book were: How to build a portfolio and how to make money using one rather simple strategy. This book gave me the necessary confidence to take control of my own finances and provided compelling reasons for doing so. I learned that ETFs (exchange traded funds) are much less expensive to own than what Wolfinger calls ‘traditional mutual funds’ …and, on average, make more money.
Wolfinger clearly outlines exactly how to use ETFs and options – a topic that had always scared me. His detailed explanation of how options work convinced me that options are indeed doable. I was also pleasantly surprised to discover that I’ve been using “options” for years – rain checks at the grocery and auto insurance policies are both essentially options. And the best part – another surprise to me – is that options actually lessen risk. My chances of losing money are now less than they were before.
The author skillfully enables his readers to understand the rationale behind trading decisions with a multitude of examples that make the lessons come to life.
The book also contains useful background information, references and statistics to support the author’s ideas. I tried it, and so far, it really works. I make my own decisions now and am happy with the results. Don’t be afraid – if I can do it, so can you. As Wolfinger says, I feel like I’m running my own small fund.
Emir Olson (verified owner) –
i love this book.. easy to understand
Valery Stephens (verified owner) –
The newest craze in investment publishing involves something about “hedge funds.” These mysterious investment vehicles (to the unsophisticated public) are seen as the investment of choice for the “rich” investor looking for outsized market gains, or a reduction in risk.
The author seemed to be taking advantage of this when he titled the book. In actuality, there is nothing more here than a basic (and I do mean basic), primer on Exchange Traded Funds, and basic options trading strategies (covered calls and short puts).
The first few chapters involve wasted pages on Modern Portfolio theory, the advantage of index funds over mutual funds, and the benefits of ETF’s over traditional index funds. Anyone who is knowledgable enough to be interested in hedge fund strategies (ie. statistical arbitrage, relative value, market neutral, etc.) will find nothing here that he or she doesn’t already know.
The second half on trading options on ETF’s is similarly light on any interesting information. Much basic information on covered calls and short puts is covered. It wouldn’t be unfair to call it simplistic.
Unfortunately, the author did not discuss the important concept of implied volatility when discussing writing strategies on ETF’s. This makes certain option strategies, that normally are equivalent, less than equal when used on an ETF.
The book correctly states short puts are equivalent to covered calls, when the puts are secured by cash. If you are going to buy 500 shares and write 5 calls, it is simpler to just sell 5 puts, and hold cash to back them up.
But the author neglects to mention that options on indexes often trade at what is called an IV skew. Out of the money calls on ETF’s are generally underpriced, while the puts are overpriced. This makes short puts backed by cash superior to covered calls on an ETF. But Lord help you if the market gets caught in a huge sell off, or implied volatility increases.
There was no discussion of identifying when it is prudent to sell options and when it is wise to remain unhedged. It didn’t address the various follow ups to covered call/short put strategies when the stock moves adversely.
If you know absolutely nothing about ETF’s, and options trading strategies, then you might find this useful. If you are looking for information on hedge fund techniques, look elsewhere.
Marcellus Correa (verified owner) –
Another excellent and clear book from Wolfinger, continuing his string of winners. We know nobody wins ALL the time (never forget that, and manage your risks very wisely), but this tack is nearly as foolproof as it gets, for the novice, like me. Loved it.
Evie Sosa (verified owner) –
Mr. Wolfinger has an excellent understandng of the Stock Market, Funds, and Options. His use of language is perfect. He presents the difficult process of trading clearly. He has put the use of the old standard trading strategies into a fresh perspective. His approach is one that is useable by the “seasoned vet” or the “newbie” to trading. I read this book from beginning to end in one setting. I trust his strategy.