CBOE RMC 2023 When To Be Long Correlation?

CBOE RMC 2023 with Nishank Modi (CBOE) and Noel Smith (Convex A.M.). The audience question is when is the best time to invert the traditional correlation/dispersion trade? A traditional long dispersion/short correlation trade is short index volatility and long volatility in the constituent names, this is desirable when coming from a high correlation regime to a new low correlation regime. This question is rooted in when would be a good idea to invert the trade structure and go short single-name volatility and long index volatility, thereby making money as correlation increases, this would be typical in a severe risk-off environment in equities. Ultimately, you pay implied correlation and you receive realized correlation, in order to profit from the long correlation trade you have to make your purchase at a lower level than it realizes, in essence you're paying to predict a market shock that the market makers do not see coming. - Convex Asset Management LLC emphasizes that investing in futures, options, and other derivatives involves substantial risk and is not suitable for all investors. There is a possibility that you may sustain a significant loss, including a complete loss of your investment capital. Past performance is not necessarily indicative of future results. Investing involves risks, and any investment strategy carries the risk of loss. Before investing, carefully consider your financial objectives, level of experience, and risk tolerance. You should only invest funds that you can afford to lose and seek independent financial advice if you have any concerns or questions.