With Enhanced Indexing Strategies, author Tristan Yates reveals how you can create and build high-performance indexing strategies using derivatives that can potentially generate much higher returns than conventional index investing. In addition, Enhanced Indexing Strategies introduces six innovative long-term indexing strategies using futures and options, each with its own advantages and applications.
Author’s Introduction:
What if we could borrow money at 5 percent and reinvest it at 10 percent annually for years or even decades? This simple idea proved to be the seed for an ambitious project, a book created to show investors how to use futures and options on index-linked securities to earn very high portfolio returns. After more than a year of writing and research, here is that book. To achieve our goal, we start with the highest performing and most reliable investment available in the marketplace, the index fund. In the past several years, literally hundreds of index-related products have been introduced in the marketplace, most designed to capture a narrow slice of returns in the broad markets and provide investors with the capability to mix and match different funds in order to build custom portfolios.
Ironically, this wide variety of investment products creates a security selection problem that is very similar to the one that indexing was created to avoid. In this book, we show exactly why some indexes perform better than others and how to successfully combine products into portfolios that deliver better risk-adjusted returns than Standard & Poor’s 500 Index (S&P 500). These index portfolios are the basis of our leveraged portfolios.
The next step is to apply leverage, and the most cost-effective way to do this is by using derivatives such as futures and options. With these instruments, it is possible to not only borrow money to invest at a low rate of return, but also, when using options, to implement hedging strategies that help reduce the risk of catastrophic losses.
A key difference between this book and others on option trading is that here options positions are used to capture long-term pricing trends rather than short-term market movements. On average, the index rises 10 percent a year, but some years it gains 25 percent and in others it loses 25 percent, and the aim is to develop and present a variety of option strategies that can capture appreciation in volatile conditions across many years. Six chapters are devoted to implementing specific long-term strategies.
As a result, this book discusses some options strategies in depth but omits others that would be inappropriate to those goals. The focus is primarily on long calls and call spreads, LEAPS options, and hedging strategies. Previous exposure to options strategies is definitely helpful, but not required, but a solid understanding of investing and index funds is obligatory, and a facility with Excel is assumed.
Contents:
- Owning the Index
- Applying Leverage
- Indexing with Synthetics and Futures
- Capturing Index Appreciation with Calls
- Leveraged Covered Calls with Futures
- Rolling LEAPS Call Options Explained
- Long-Term Returns Using Rolled LEAPS
- Long and Short Profits with Call Spreads
- Cycling Earnings Using Spread Positions
- Practical Hedging with Put Spreads
- LEAPS Puts and Three Ways to Profit
- Managing the Leveraged Multistrategy Portfolio
Enhanced Indexing Strategies: Utilizing Futures and Options to Achieve Higher Performance By Tristan Yates pdf
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