Hedge funds refocus on volatility diversification trading strategies, market concerns over trading congestion and liquidation risks

The differentiation of the AI industry, energy stock volatility caused by the situation in Iran and Ukraine, and the rise in US bond yields have driven the divergence of individual stock trends in the US, prompting hedge funds to refocus on volatility diversification trading strategies. This strategy involves buying individual stock options and selling S&P 500 index options, betting on the volatility differences of constituent stocks. According to data from Nomura Securities, the degree of differentiation between the actual absolute returns of S&P 500 constituent stocks and the index has risen to the 95th percentile in the past 30 years. Kris Sidial, Co Chief Investment Officer of Ambrus Group, believes that the transaction faces the risk of concentrated liquidation. (Source: Bloomberg)