Concerning dispersion trading whereby one would go long options on various stocks within an index and then short options on the index. I would think that since the implied volatilities on the individual stocks are typically higher than on the index itself, I would guess that over the long haul since you’re always buying higher IV and selling lower IV that you would have a rough time generating any worthwhile profits. Any insights would be greatly appreciated.
Posted by ribbit63
2 Comments
Seems like a lotta trouble for not a lotta payout. There are easier ways to make $ in this market, no?
Avoid stock specific bets. Buy etf. Then. Using that margin but put butterfly below index. Then sell far otm covered call if rally happens.