Making an acronym

Pyth, 25 21 20 bytes

shM-crz1dc4."@YK½¼

Try it here!

Thanks to @Jakube for saving one byte!

Explanation

shM-crz1dc4."@YK½¼  # z = input

     rz1               # convert input to uppercase
    c   d              # split input on spaces
         c4."@YK½¼     # create a list of the words from a packed string which shall be ignored
   -                   # filter those words out
 hM                    # only take the first letter of all words
s                      # join them into one string

The packed string becomes ANDBYOROF

Jelly, 21 20 bytes

,“°ɲịĊs°gɗ»ṣ€⁶Œuḟ/Ḣ€

Try it online!

(-1 thanks to @Dennis.)

,“°ɲịĊs°gɗ»              Pair input with the string "OR OF by AND"
           ṣ€⁶           Split both by spaces
              Œu         Uppercase
                ḟ/       Reduce filter (removing ignored words from input)
                  Ḣ€     Keep first letters of remaining words

Jelly's dictionary is a bit weird in that it has AND in uppercase yet by in lowercase...

Retina, 29 31 36 bytes

T`l`L
 |(AND|OR|BY|OF)\b|\B.

Intended newline at the end.

Thanks to Martin Büttner for saving 5 bytes

Try it online

T`l`L                  # Replace lowercase with uppercase
 |(AND|OR|BY|OF)\b|\B. # Regex match, it doesn't matter if we match 'AND' in SHAND
                       #   since the 'SH' will still become 'S' or am I missing something?
                       # Replace with nothing