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www.journalofndexes.com Vol. 15 No. 6 features More Options With More Options By Chintan Kotecha, Nitin Saksena, Youssef Brahimi and Benjamin Bowler ...................................10 The most liquid ETF options—and what you can do with them. Index Options Writing For Enhanced Yields And Alpha By Matt Moran and Mitch Boraz . . . . . . . . . . . . . . . . . . . . . 20 Options indexes for a low-interest-rate environment. Creating A Vertical Spread Index By Mark Abssy......................................28 Tracking the performance of options overlay strategies. Options Before Quants By David Blitzer ....................................34 Options have been around longer than most folks realize. 20 Human Risk and The Pervasiveness of Index Derivatives By Jonathan Citrin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 The popularity of index-based derivatives isn’t without drawbacks. IMRF’s Shah Stays The Course By Journal of Indexes Staff...........................38 IMRF’s new CIO talks asset management. The Winner’s Curse By Rob Arnott and Lillian Wu . . . . . . . . . . . . . . . . . . . . . . . . 42 The leading companies are also among the most disadvantaged. Thinking About Options By Bruce Greig......................................66 How well do you know options? Find out in this issue’s puzzle. news Home Prices Nearing Recovery? . . . . . . . . . . . . . . . . . . . . . 52 Federal Court Dismisses ProShares Suit . . . . . . . . . . . . . . 52 Russell Debuts ‘GeoExposure’ Index Family . . . . . . . . . . 52 FTSE Signs Deal With Chinese Exchange . . . . . . . . . . . . . 53 FocusShares Closes Up Shop . . . . . . . . . . . . . . . . . . . . . . . . 53 Russell Closing ETFs, Altering Plan . . . . . . . . . . . . . . . . . . 53 Shiller, Barclays Launch ‘CAPE’ Indexes. . . . . . . . . . . . . . 53 data Global Index Data ..................................58 Index Funds ........................................59 Morningstar U.S. Style Overview . . . . . . . . . . . . . . . . . . . . . 60 Dow Jones U.S. Industry Review . . . . . . . . . . . . . . . . . . . . . . 61 Exchange-Traded Funds Corner . . . . . . . . . . . . . . . . . . . . . 62 28 42 www.journalofindexes.com November / December 2012 1
Contributors Mark Abssy Mark Abssy is the senior index and ETF manager for the International Securities Exchange (ISE). In this capacity, he is responsible for all phases in the development of innovative tradable products, from concept to commercial launch. Abssy is a member of the CFA Institute and the New York Society of Security Analysts, and received a BSBA in finance and international business from Northeastern University. Robert Arnott Robert Arnott is chairman and founder of asset management firm Research Affiliates LLC. He is also the former chairman of First Quadrant LP and has served as a global equity strategist at Salomon Brothers (now part of Citigroup) and as president of TSA Capital Management (now part of Analytic). Arnott was editor-in-chief of Financial Analysts Journal from 2002 through 2006. He graduated summa cum laude from the University of California, Santa Barbara. Chintan Kotecha Mitch Boraz David Blitzer Jonathan Citrin David Blitzer is managing director and chairman of S&P Dow Jones Indices’ index committee. He has overall responsibility for security selection for the company’s indexes, and index analysis and management. Blitzer previously served as chief economist for Standard & Poor’s and as corporate economist at The McGraw-Hill Companies. A graduate of Cornell University, he received his M.A. in economics from George Washington University and his Ph.D. in economics from Columbia University. Mitch Boraz, CPA, CIMA, is a director at Asset Consulting Group. He services a wide variety of clients with an emphasis on ACG’s private client services advisory practice, which includes family offices, high-net-worth investors, endowments and foundations. Boraz’s responsibilities include managing and developing client relationships. He is also a member of ACG’s investment committee. Boraz received his B.A. in accounting from the University of Missouri-St. Louis. Jonathan Citrin is the founder and CEO of CitrinGroup. He is also the chairman of the firm’s investment advisory board and an adjunct faculty member in the finance department at Wayne State University’s School of Business Administration. Prior to forming CitrinGroup, Citrin managed investment portfolios at Morgan Stanley and Morgan Stanley Dean Witter. He received his B.A. from Tulane University and his M.A. from New York University. Chintan Kotecha joined Bank of America Merrill Lynch Global Research in 2008 and is a senior analyst in U.S. equity derivatives. He specializes in innovative uses of VIX, volatility and equity derivatives for hedging and alpha generation. Kotecha holds an M.S. in computational finance from Carnegie Mellon University and a B.S. in electrical and computer engineering from Rutgers University. His research has also been published in the Journal of Alternative Investments. Matt Moran Matt Moran is vice president, business development, for the Chicago Board Options Exchange. He has also served as trust counsel at Harris Bank and as vice president at the Chicago Mercantile Exchange. Moran is an associate editor of The Journal of Trading and The Journal of Index Investing. He is a licensed attorney who has received MBA and Juris Doctor degrees from the University of Illinois. 2 November / December 2012
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©2012, THE NASDAQ OMX GROUP, INC.
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