Volatility dispersion trading is a popular hedged strategy designed to take advantage of relative value differences in implied volatilities (IV) between an index and a basket of component stocks. This strategy typically involves short option positions on an index, against which long option positions are taken on a set of components of the index. EGAR DISPERSION ASP provides powerful and proprietary analytical measures that empower traders to better analyze the two main factors that determine the success of the strategy: (1) the timing of execution and (2) which component options to select to offset the index options. These measures include implied correlation, equivalent index IV, stock specific variance, contribution in index IV and ratios of index volatilities calculated from the components vs. actual index volatility.
The proprietary data calculations of EGAR DISPERSION ASP have quickly been found to be extremely valuable to all options traders, even those that donât engage a dispersion strategy. These measures can be utilized to generate profits in a variety of trading scenarios such as relative value trading and correlation based trading. In addition, the range of available indices make intense sector analysis possible so that traders can filter and select the best current opportunities within a sector in a much more effective and time efficient manner. These indices include US and European broad and sector indices such as CAC, DAX, DJX, MSH, NDX, DEX, DSX, SOX, and SPX. Many traders are also utilizing EGAR DISPERSION ASP to advance their personal research and for control implementation.
The completely web-based DISPERSION ASP complements EGAR Dispersion, a stand-alone client/server system released in October 2000 that adds portfolio analysis and risk reporting functionality. DISPERSION ASP eliminates the technical issues associated with stand-alone systems, such as installation, data feeds and firewalls.
CEO Ravi Jain says, "Because DISPERSION ASP is now available as a completely web-based system, we have made the powerful analytics that were previously available only to institutions ready to invest a large amount of resources in the necessary infrastructure, available to a broader market.â He adds, âThis is evidenced by the huge demand we are seeing from the market as evidenced by new clients such as Nomura International, Commerzbank, Equitec Proprietary Markets, Bear Wagner Specialists, Tanstaafl, and Parallax."
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