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| license: other | |
| license_name: dispersion | |
| license_link: https://thetatitans.com/home/dispersion-trading/ | |
| tags: | |
| - Dispersion trading | |
| - dispersion | |
| - dispersiom trading strategies | |
| pretty_name: Dispersion | |
| <meta name="google-site-verification" content="pwujqYZKC4JcyfBByW7lCvok9y2mD8_ALBQVHcM0snE" /> | |
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| Dispersion trading can be profitable, but it’s nuanced and depends on the dynamics of implied and realized correlations in relation to overall market volatility. For instance, in normal conditions, indices like SX5E and S&P500 may have an implied correlation ranging from 50-70% and a realized correlation of 30-60%. This gap reflects the market’s anticipation that extremely low correlations are unlikely to persist, presenting potential risks for a long dispersion trade. https://thetatitans.com/home/dispersion-trading/ | |
| The strategy inherently assumes that implied correlation is expected to be above the average realized correlation https://thetatitans.com/home/dispersion-trading/ | |
| due to its short volga nature. |