Benefits
- Suppression of implied volatility’s extra cost in call options: Call prices depend on the implied volatility level, usually higher than realised volatility, representing the risk premium, seen as an extra cost of call prices. The Timer Call avoids this extra cost.
- Systematic market timing: The Timer Call systematically optimizes market timing. If volatility increases, the call terminates earlier, with the investor realising a profit. If the vol doesn’t rise, the call simply takes more time to reach maturity. In other words, time becomes extractable as an investible asset class (like volatility became an asset class with the invention of the vol swap).
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