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Sector-based approach to popular vol trades boasts cheaper entry cost than classic version, proponents argue
Dealers are pitching a long-derided version of the equity dispersion trade which could benefit from sector rotations that typically occur ahead of US presidential elections.
While classic dispersion trades see investors pair a short position in the volatility of a major index – typically the S&P 500 – with a long position in the volatility of a group of single stocks, a sector-themed alternative replaces the long stock vol position with a long volatility position on sector-based exchange-traded
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