Equity Dispersion – the Greeks

Share on linkedin
Chalk logo

In Short

Equity dispersion trading allows investors to capture the correlation risk premium embedded in equity indices and revolves around selling index volatility and buying single stock volatility.

The relative weighting of the index to single stock volatility can be varied to adjust the net volatility exposure of the trade. Fulcrum generally pursues a weighting scheme that allows investors to pick up the carry from the risk premium alongside a net long single stock volatility exposure. This potentially allows the fund to perform well in a left tail event like March 2020 (but by no means should this be viewed as a tail hedge fund).


The “Greeks”, namely the delta, gamma, vega and theta, will vary according to the weighting scheme and the implementation methodology. The primary objective is to buy/sell implied volatility and deliver a measure of subsequent realised volatility. There are two primary routes to achieve this; one can either hold an option portfolio and delta hedge or hold a volatility or variance swap.

To access this White Paper, please fill in the form to be reviewed by our team.

Your privacy
We use cookies to offer you better experience, analyse site traffic, and serve targeted advertisements. By continuing to use this website, you consent to the use of cookies in accordance with our Cookies and Privacy Policy.
Strictly Necessary – cookies that are necessary for the proper functioning of the website.