Applications of Cliquet Options

The period strike setting feature of a cliquet enables an investor to implement a strategy consistent with rolling options positions but without exposure to volatility movements. 

 

For example: an investor could buy a cliquet to implement a rolling 3m put strategy and be immunized against the future increase in options premiums that would accompany increases in volatility throughout the life of the strategy. Hence, a cliquet provides cost certainty, whereas the rolling put strategy does not. 

 

Numerous variations exist and can be tailored to give very different risk-reward profiles. The customizability of cliquet options likely means we will continue to see product innovation in this area in the future.  

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