Dirty (sic) Dispersion!
- Thread starter atticus
- Start date
In my career time I only know of one year where the pnl of top50 dispersion was driven by the single stock side: 2004 with the vioxx fiasco for mrk and pfe.
Otherwise it's been really just short index vol.
FDAX is a bright guy, but... dispersion over the past few years has deteriorated into what pretty much amounts to short index vol trade - dispersion traders blow up like on cue when the going get tough. In general, dispersion is a great trade when you are entering into the trade at high implied correlation levels otherwise it's too scary for my taste.
And then it's easier just to sell index vol. you'll make te same money on less gross vega.
i hear so many comments about being short vol... are any of you at any point long vol? in single stocks or even an index? i realize if your managing condors and rolling etc and very actively managing your book that makes alot of sense.. but am i off in this statement? seems like alot of people i notice write in these forums are mainly short premium short gamma short vol. ... no black swan traders here?
I am almost never naked short or long anything. The idea is to trade one form of risk premium against another. So far, "black swan" years have been my best years pnl-wise, just by nature of what risk premium i think is rich and which risk premium i think is cheap (or, better, 'not too rich')
I am always long vol where tail events can hit the most and of course short vol in the back ends...despite my handle, lol. finding that right mix does take years to master I will admit.