The underlying idea behind “Options Away” is quite interesting. I can’t help but wonder why the airlines and/or the various intermediaries such as Expedia and Orbitz haven’t already implemented similar arrangements.
The “insurance” described in the article referenced below is different from traditional travel insurance which requires purchasing a ticket prior to buying the insurance. Here, one can purchase a call option that locks in a favorable fare today without obligating the consumer to actually purchase the ticket.
Options Away: Insurance Against Airfare Hikes
“Options Away… will sell you the right to buy a plane ticket within a certain timeframe at a certain price. If the airfare goes up within your option’s time frame, good for you—you can buy the ticket, paying your optioned fare, and Options Away pays the difference. If the airfare goes down within your option’s timeframe, you simply ignore your option and buy your ticket at its now lower fare. Either way, you’re out the option fee, but you are not obligated to buy the ticket.”
Really interesting! When you start to think about options, you realize that you may actually apply the theory behind it on a lot of different every day encounters. I have wondered why no mortgage lender (at least in Scandinavian) offers options. I believe there is a market for put options, who would not want to buy a “protection” against losing value on the underlying house. Maybe I’m missing something fundamental, however I still believe its a interesting thought.
What would happen if you buy the optionality on specific flight and during the specified time frame, the flight would be canceled or fully booked? If so, would the option disappear as the underlying asset wouldn’t exist anymore? Maybe Options Away have partnered up with different carriers where they simple hold tickets for customers that have bought this option during the specific time frame.
Björn, these are all very good questions. I would want to know the answers prior to purchasing any of these option!
I have been following these guys since they appeared on CrankyFlier. The product is awesome- I can hold my flights against a price increase and give myself flexibility for where I want to go by purchasing multiple options before I finalize my plans.