Market participants are usually assumed to be risk-averse and striving to improve the Sharpe ratios of their portfolios. Thus, if we have an asset A, which is expected to return between \$900 and \$1100, and an asset B, which is expected to return something between \$500 - \$1500, then on the market should price A higher. For example, the A may cost \$995, while B \$975.
This reasoning predicts a potential existence of particular option-like securities that would absorb those assets' expected volatility. Such security, being sold, should probably cost around a difference between the average and assets market price, so the owner of asset A could buy it for \$5, while the other for, say, \$25. The security seller would receive the premium + all potential gains and losses from the underlying on a particular date.
What puzzles me is that I seemingly cannot construct something like this from securities accessible to a DIY investor like me, a combination of stocks, bonds, options, futures. Everything I could come up with causes the "seller" in the example above to pay the premium. For example, longing a call and shorting a put on the same strike price will be a net negative.
So, assuming a random walk with normal distribution, the questions are:
- Does anything like this exist in the finance world?
- Is it going to have at least a positive value for the holder? If no, why?
- Can you reproduce it with a set of options?