FICC Focus All Options Considered: Equity Derivatives Dynamics With UBS
Jan 16, 2026
Maxwell Grinacoff, Head of US Equity Derivatives Research at UBS, shares invaluable insights into the current dynamics of equity derivatives. He explains how AI concentration has driven low SPX correlation despite high single-stock volatility. They delve into the rise of derivative-based ETFs and retail trading, revealing how these trends are reshaping market flows. Grinacoff also discusses strategic trades, including a compelling bet on Nasdaq volatility over S&P, and the significant implications of structured products in today's market.
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Low Correlation Masks Hidden Stock Volatility
- Low realized correlation masks large underlying stock moves and reduces index volatility despite active single-stock action.
- Concentration in MAG-7 means index returns can be flat while individual stocks swing widely, complicating index vol strategies.
AI Momentum Keeps Single-Stock Vol Elevated
- Single-stock volatility rose as investors chased AI-driven upside and large earnings shocks, keeping single-stock vols elevated.
- That dynamic supports a long-dispersion setup if correlation stays low and single-stock vol remains high.
Buy Single-Stock Vol With Retail Calm
- Consider buying single-stock vol into earnings when implied moves compress and retail euphoria wanes.
- Monitor retail activity because renewed momentum chasing can quickly re-elevate implied moves.