Correlation of stocks options IV to index options IV

Discussion in 'Options' started by Rudolf13100, Jul 17, 2008.

  1. Dear all,

    I would really appreciate if those you can could provide me with answers to the two questions I have.

    S&P 500 stocks are rather well correlated to the performance of the index itself (S&P500). My main question is: how about IV?

    On average, is the IV of S&P500 stocks options rather well correlated to the IV of S&P500 index option?

    Also, on average, would the correlation of the IV of a S&P500 stock option to the IV of an option of the S&P500 index be LOWER OR HIGHER than the average correlation of the performance of a S&P500 stock to the performance of the S&P500 index?
  2. Raver


    Do a search on google on 'dispersion trading'
  3. Indeed, I am trying to get familiar with the dispersion trading strategy and that is exactly the reason why I was asking the question above.
    Options are new to me and, therefore, it is a little bit challenging.
  4. Raver


  5. dmo


  6. Dispersion trading is not really a strategy for the retail trader. Also dispersion has been done to death over the last 6 or 7 years. To be honest I dont think a lot of the dispersion portfolios have done all that well in the last 12 months. In order to make dispersion really work you need access to order flow in both the individuals and the indexes.
  7. Thanks for all your replies.
    I am studing the article mentioned above. I need a little more time to figure out the whole thing.