September 9, 2024 (NO COMMENTS)

Sector-based approach to popular vol trades boasts cheaper entry cost than classic version, proponents argue

 

Dealers are pitching a long-derided version of the equity dispersion trade, which could benefit from sector rotations that typically occur ahead of US presidential elections. While classic dispersion trades see investors pair a short position in the volatility of a major index – typically the S&P 500 – with a long position in the volatility of a group of single stocks, a sector-themed alternative replaces the long stock vol position with a long volatility position on sector-based exchange-traded