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).
Read more about this topic: Timer Call
Famous quotes containing the word benefits:
“One of the benefits of a college education is, to show the boy its little avail.”
—Ralph Waldo Emerson (1803–1882)
“One of your biggest jobs as a parent of multiples is no bigger than simply talking to your children individually and requiring that they respond to you individually as well. The benefits of this kind of communication can be enormous, in terms of the relationship you develop with each child, in terms of their language development, and eventually in terms of their sense of individuality, too.”
—Pamela Patrick Novotny (20th century)
“When your parents are in political life, you aren’t normal. Everybody talks about the benefits, but I don’t know what the benefits are.... But I’d rather have that kind of mother than an overweight housewife.”
—Katherine Berman Mariano (b. 1957)