Dispersion trades are back after losing big in 2020

Bets on single-stock versus index volatility are “incredibly attractive by historical standards”

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An equity derivatives trade that lost hundreds of millions of dollars during the Covid-19 selloff last March is suddenly popular again.

The prospect of rising inflation leading to further sector rotations has renewed interest in dispersion trades, where investors go long single-stock volatility and short index volatility.

Dispersion is “the most exciting trade in the market right now”, says Hervé Guyon, head of flow strategy and solutions for Europe at Societe Generale.

This is because

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