volatility
Unintended Consequences of Systematic Covered Call Writing
Patrick Ceresna
Enhancing income and returns through covered call writing has become one of the most common strategies being adopted by investors. Arguably selling calls against shares and ETFs is considered a conservative strategy that almost any Canadian retail investor can access, in and out of their registered accounts. While many...
Buyers of Options Can Face an Uphill Climb
Hans Albrecht
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...
It’s Good to be the Insurer
Hans Albrecht
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...
Understanding Volatility Exchange Traded Products
Hans Albrecht
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) –...
Will Volatility Revert to the Mean?
Hans Albrecht
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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