Profiting with Synthetic Annuities
The “synthetic annuity” is an options-based strategy that trades off large gains in exchange for higher yields and better downside protection, and utilizes risk more efficiently than pure stock-based portfolios. In Profiting with Synthetic Annuities, this strategy’s creator shows exactly how to use it to support a wide range of trading and investing goals. Hedge fund manager and investment strategist Michael Lovelady shows how synthetic annuities blend the best features of traditional portfolios with the risk management discipline of quantitative investing, increasing current yields while also reducing volatility. Lovelady explains this new strategy with “time-lapse” images and simplified models that any investor can understand and apply, and demonstrates its value in the context of today’s key market trends. Lovelady explains the entire “ecosystem” surrounding synthetic annuities: theory, product, and tools. Instead of focusing on the standalone use of options, he shows how to integrate them into traditional investment management, including mean-variance portfolios. This book demonstrates how synthetic annuities can help cautious investors reduce volatility and increase returns; improve risk management for value investors and their advisors; help experienced options traders leverage market exposure or yield; and enhance flexibility for institutions with strict prudence requirements. Along the way, he offers deep and intuitive insights into options that will be valuable to any trader or student of finance.
From the Back Cover
“For years, academics and investors have been aware of the limitations of so-called Modern Portfolio Theory (MPT). Absent an obvious alternative, many continue to apply MPT, presumably unaware of a superior alternative. In an ambitious effort, Michael Lovelady demonstrates a better way to minimize downside portfolio risk while achieving higher risk-adjusted yields. Lovelady does not dismiss MPT but blends it with quantitative investing to fill the void between theory and reality through his skillful development of synthetic annuity strategies. While there are no panaceas in life, synthetic annuities seem to offer a significant improvement over conventional wisdom.”
–Donald M. DePamphilis, Ph.D, Clinical Professor of Finance, Loyola Marymount University; and author of Mergers, Acquisitions, and Other Restructuring Activities, Sixth Edition
“The author brings together the best of both the options and stock worlds in this very practical book. Smarter than most hedge funds, he spells out specific strategies and how to deal with inevitable problems. Unlike most fluff trading books, you’ll know what you are doing and why you are doing it. By the time you are done, you will definitely reevaluate the strategy behind your own portfolio. What more can you ask for in any book?”
–Michael Benklifa, author of Profiting with Iron Condor Options, President of Othello Consulting
“Michael Lovelady explains a range of options strategies in a concise and clear manner to help you rethink your approach to risk and timing, and to the overall market as well. Michael shows why options should not be relegated to trading accounts, or the 5% to 10% normally allocated to alternative investments, but have an important role to play across all aspects of the portfolio. A creative new take on investing presented in a series of visuals accessible to anyone interested in new ideas: Excellent!”
–Michael C. Thomsett, author of Options Trading for the Conservative Investor
Options-based “synthetic annuities” give investors the ability to generate higher returns, provide better downside protection, and utilize risk more efficiently than pure stock and bond-based portfolios. Now, this strategy’s creator shows exactly how to use them to support a wide range of trading and investing goals.
Hedge fund manager Michael Lovelady shows how synthetic annuities blend the best features of traditional portfolios with the risk management discipline of quantitative investing, increasing current yields while also reducing volatility.
Michael presents this new strategy with unique graphics and simplified models that any investor or trader can use, and demonstrates its value in the context of today’s key market trends. He illuminates the entire “ecosystem” of theories, products, and tools surrounding synthetic annuities, and shows exactly how to integrate them with other investment and portfolio management techniques.
If you’re a conservative investor…
…this book will help you reduce volatility and increase returns
If you’re an aggressive investor…
…it will help you structure positions with targeted yield and risk
If you’re responsible for portfolio policy decisions…
…it will help you navigate the gap between traditional and emerging strategies
If you’re an experienced options trader…
…it will help you think beyond named strategies to goal-based structures
If you trade accounts with strict prudence requirements…
…it will give you new flexibility without compromising safety
Whoever you are…
…you’ll learn powerful, new ways to think about and profit from options!
- Hardcover: 272 pages
- Publisher: FT Press (June 2012)
- Language: English
- ISBN-10: 0132929112
- ISBN-13: 978-0132929110