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ETFs 111: Investing in Alternatives with Exchange-Traded Funds

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1.
Price momentum, valuation, and carry are all examples of ________.
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Long positions and short positions. These strategies use both long and short positions to expose themselves to currencies.
2.
Inverse exchange-traded funds offer _______.
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The exact opposite return of a particular index. Thus the name 'inverse.'
3.
Leveraged inverse exchange-traded funds aim to provide _______.
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Several times an index's return. They aim for two or three times the index's return.
4.
What is a hedge-fund replication strategy?
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One that attempts to match the returns of an index of hedge funds through ETF, futures, or swap contracts. A hedge fund replication strategy takes long and short positions in ETFs, futures, and swaps to mimic the returns of a hedge fund index in an ETF or mutual fund vehicle. These strategies can provide equity-like returns with less volatility than equity indexes.
5.
What does a buy-write stock-index strategy do?
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Sells call options on a stock index. A buy-write or covered-call writing strategy writes or sells call options on a stock index, such that if the call is exercised, it is "covered," and the cash-value of the index can be delivered to the holder of the option. The premium received from writing the calls provides some protection against losses on underlying stock index, but also caps the gains on the index.
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