Despite record-high entry costs, equity dispersion trades thrived in January, fueled by AI-driven volatility and shifting tariff policies. This Risk article explores how traders capitalized on market swings, using OptionMetrics data to analyze volatility pricing.
“Dispersion benefits when implied correlation is greater than realized correlation, and when that gap is sufficiently large, it means the juice is worth the squeeze. When the gap is small, or realized correlation is greater than implied, it becomes riskier and you should probably just put your money in cash,” says Garrett DeSimone, Head of Quant at OptionMetrics.
With market uncertainty at play, access to high-quality options data is more critical than ever.