Profiting with Synthetic Annuities: Option Strategies to Increase Yield and Control Portfolio Risk

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.