Dispersion Trading
Dispersion Trading — Index vol versus single-name vol — a pure play on implied correlation.
Definition
Dispersion Trading refers to index vol versus single-name vol — a pure play on implied correlation. Keep that definition fixed when comparing series, managers, or regimes — renaming the same tape does not create a new signal.
Why it matters
Options and futures embed views on vol, skew, and path that cash markets only hint at. When index vol versus single-name vol — a pure play on implied correlation shifts, related hedges, limits, and narratives usually need an explicit update rather than a quiet assumption.
Case
Suppose a desk is positioned for the opposite of what dispersion trading is saying. If index vol versus single-name vol — a pure play on implied correlation moves against that book, the first question is not “is the story clever?” but whether size, hedges, and stop logic still match the observation.
How to read it
State the expiry and Greek exposure; unmarked vol or pinning effects rewrite the thesis. Prefer a short written null hypothesis for Dispersion Trading: what would falsify the current reading in the next window?