Covered Calls and Gold                        –                               A Perfect Match
September 18, 2017
Risk Management

Covered Calls and Gold – A Perfect Match

This is a fairly consistent rule in listed options markets: As assets rise in value, option pricing tends to pull back on a relative basis. As markets push higher, investors are deemed to be less fearful and therefore the cost to insure a portfolio against a market drops. We see this rule routinely play out in the VIXC (the...

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1 month ago
Buyers of Options Can Face an Uphill Climb
August 16, 2017
Volatility

Buyers of Options Can Face an Uphill Climb

S&P/TSX 60 (“the Index”) options are generally priced a little too high versus actual market movement. In other words, many buyers of insurance will pay more than ‘fair value’ for options in order to protect against drawdowns and volatile market environments. Based on an ongoing measure of realized volatility, or...

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2 months ago
It’s Good to be the Insurer
May 04, 2017
Risk Management

It’s Good to be the Insurer

  Option pricing, or insurance, is a relative value product. For instance, a $300 annual premium for $1 million of life insurance coverage for a young, healthy individual is reasonable. However, that same $300 price tag to insure a 65 year-old smoker with high blood pressure is way too cheap. When it comes to life...

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6 months ago
Understanding Volatility Exchange Traded Products
March 28, 2017
Volatility

Understanding Volatility Exchange Traded Products

Using volatility ETPs is a pure play way to target volatility for your portfolio – no strike risk to worry about. But make sure you understand the key points below very well before wading in… ——————— I’m often asked about long volatility exchange traded products (ETPs) –...

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7 months ago
Will Volatility Revert to the Mean?
March 22, 2017
Other

Will Volatility Revert to the Mean?

A crucial foundation for understanding how option volatility works is the concept of ‘mean reversion’. For a period, stocks can go up and stay up, and they can conversely go down and stay down. But option pricing will generally have trouble staying high or low for an extended length of time. So why do prices eventually move...

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7 months ago