Create Your Own Hedge Fund: Increase Profits and Reduce Risks with ETF's and Options (Wiley Trading Series)

253 Pages·2005·2.04 MB·English

by  Mark Wolfinger

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Create
Your Own
Hedge
Fund
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Create
Your Own
Hedge
Fund
Increase Profits and
Reduce Risk with ETFs
and Options
MARK D. WOLFINGER
John Wiley &Sons, Inc.
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Copyright © 2005 by Mark D. Wolfinger. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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Library of Congress Cataloging-in-Publication Data:
Wolfinger, Mark D.
Create your own hedge fund : increase profits and reduce risk with ETFs and
options / Mark Wolfinger.
p. cm. — (Wiley trading series)
Includes bibliographical references and index.
ISBN 0-471-65507-4 (cloth)
1. Hedging (Finance) 2. Stock options. 3. Exchange traded funds. I. Title
II. Series.
HG6024.A3W65 2005
332.64'524—dc22
2004016625
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1
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This book is dedicated in loving memory to my parents,
Betty and Khiva Wolfinger. They would have loved to see
their son become an author.
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Contents
Acknowledgments ix
Preface xi
PART I Outperforming the Market 1
CHAPTER 1 Modern Portfolio Theory 3
CHAPTER 2 Can You Beat the Market? Should You Try? 9
CHAPTER 3 Hedge Funds 20
PART II Exchange Traded Funds 27
CHAPTER 4 A Brief History of Mutual Funds and
Exchange Traded Funds 29
CHAPTER 5 Traditional Mutual Funds 32
CHAPTER 6 Exchange Traded Funds 38
PART III Options 53
CHAPTER 7 What Is an Option and How Does an Option
Work? 55
CHAPTER 8 More Options Basics 60
vii
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viii CONTENTS
CHAPTER 9 Why Investors Buy and Sell Options 69
CHAPTER 10 Option Strategies You Can Use to
Make Money: Covered Call Writing 80
CHAPTER 11 Option Strategies You Can Use to
Make Money: Uncovered Put Writing 100
CHAPTER 12 Historical Data: BuyWrite Index
and Volatility Index 111
PART IV Putting It All Together 121
CHAPTER 13 Building a Portfolio 123
CHAPTER 14 Finding Your Style: Choosing
an Option to Write 131
CHAPTER 15 Covered Call Writing in Action: A Year of
Trading 141
CHAPTER 16 Uncovered Put Writing in Action 195
CHAPTER 17 Odds and Ends and Conclusion 212
Notes 216
Glossary 227
Index 231
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Acknowledgments
M
any thanks to my family and friends who provided guidance, sup-
port, encouragement, and great information, particularly Lynn
Seligman, Nancy Crossman, Gail Reichlin, and Camden McKinley.
A special thank you to my life-partner, Penny Rotheiser, whose attention to
detail proved invaluable.
And thank you to all the dedicated people at John Wiley & Sons who
did their jobs well and provided encouragement and answers to my many
questions. Their input made the completion of this project both more en-
joyable and more efficient: Jeanne Glasser, for encouraging me to submit
the book proposal in the first place; editor Kevin Commins; editorial direc-
tor Pam van Giessen; editorial assistant Lara Murphy; editorial assistant
Matt Kellen, who found the help I needed on every conceivable topic; mar-
keting manager Felicia Reid; and production manager Alexia Meyers, who
carefully transformed the raw manuscript into the finished product.
Thank you all.
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