Wall Street’s Crowded Options Trade Survives Recent Stock Turmoil
- Dispersion trade took a hit in last week’s stock turmoil
- Critics warn wager risks becoming too popular for its own good
The so-called dispersion trade has boomed in the bull market era.
Photographer: Michael Nagle/BloombergThis article is for subscribers only.
A popular hedge-fund trade betting on calm is reloading after the equity selloff, even as some critics warn it helped fuel the recent turmoil.
Once a niche strategy for specialized hedge funds, the so-called dispersion trade has boomed in the bull market era — netting big gains by riding placid equity indexes while wagering that volatility will hit underlying companies.