There is an excellant book by Mark D. Wolfinger that really expains the concept in great detail. The title is "Create Your Own Hedge Fund". I was totally blown away. Since reading the book I have been doing in my personal account what PBP is doing and have actually outperformed it by a fraction of a percent. I started in early December '08. I also employ the same strategy outside the S&P-500 with great short-term profits.

Give the book a read. You will find it worth it.