Dispersion At A Rare Extreme — May Begin to Unwind This Week
This is the new format I introduced for the daily paid member write-ups this week.
Saturday, April 25, 2026
Note: this is the free weekend recap. The thesis and macro framing are here in full; the granular options-positioning, individual-name setups, and weekly cross-asset levels live in the paid member commentaries.
Tape Card
What’s New Today
DSPX historical context — The S&P 500 Dispersion Index series goes back to around the middle of 2014. It has only been higher on a couple of occasions: the fall of 2025, the tariff tantrum, and COVID. The index can rise during times of broader market volatility, but on a quarterly basis it tends to move up into earnings season and back down afterward.
VIXEQ − VIX framework introduced — If you take the VIXEQ and subtract the VIX, what you get is dispersion — overlay the DSPX, and they’re basically the same chart. When constituent vol is rising while the VIX is getting pushed lower, the implied dispersion index goes up.
Goldman / IBM as live vol-crush examples — The VIX-on-Goldman rose into earnings and has come all the way back down post-print. Same with the VIX-on-IBM after this week's report.
Seasonal/cyclical pattern named — The dispersion trade has run on essentially the same cadence across July 2025, September 2025, October 2025, January 2026, and now March / April 2026. Mike calls it close to “a sine graph” — earnings windows generally push it up, post-megacap earnings generally start to bring it down.
February analog cited — In mid-February, basically right after NVIDIA reported, the dispersion index came all the way down, and the S&P came down with it. The dispersion index turned back up in mid-March and really took off on March 23, even as the S&P was still going lower.
Index divergence framing — S&P 500 and Nasdaq both at new highs; Dow and RSP not. Dow Transports is technically at a new high, but Avis's inclusion in the index has skewed the average, so it's not worth paying attention to. Small caps also at a new high.
SPY ÷ RSP as the read — Looking at SPY divided by RSP — cap-weighted over equal-weight — is how you get a really good sense of what dispersion is doing.
Thin volumes amplifying moves — Volumes in the S&P have been “sort of nonexistent.” When market participants thin out and the top of the book thins, markets tend to move more quickly than they normally might.
War as an outlier wildcard — The war is an outlier. Assuming the war continues and is managed, it’s more likely than not that the dispersion trade will probably unwind like it normally does.
What Changed From Yesterday
Meta (restated, thesis-level) — Today: one-week ATM IV on Meta has gone up rather dramatically as we approach earnings next week, and will come down rather sharply once results pass. Probably why Meta’s stock has gone parabolic.
Amazon (restated, thesis-level) — Today: VIX-on-Amazon is kind of elevated heading in; should come down sharply post-print this week once event risk clears.
VIX (potential reflex) (new wrinkle) — As the trade is unwound and long single-stock IV comes down, the short position on index implied vol could get covered or unwound — and maybe pushes the VIX back up some.
Unchanged from yesterday — Liquidity-gauge composition (XLF, PSP, RSP, Bitcoin) not re-addressed; semis-overbought (SMH four weeks up) not re-addressed; Brent contract-roll explainer not re-addressed.
Not restated today — Per-name option-positioning specifics from yesterday (Amazon / Meta / Microsoft / Apple / Alphabet stock levels, call walls, put walls, max pain, IV percentages); Intel 26-year breakout; Witkoff / Kushner geopolitics; central-bank meeting line-up; rates and FX; CDS divergences.
More Here:
Catalysts Ahead
Mega-cap earnings cluster — this week. Five mega-cap earnings this week (META, MSFT, AAPL, AMZN, GOOG); makes six having reported by the end of the week, with Tesla already done.
Dispersion unwind — by the end of the week/midweek. If this has all been about mechanical trades, the unwind likely begins by the end of the week. Once the DSPX begins to decline, the S&P probably starts to give back some of the recent gains.
NVIDIA earnings — mid-May. Two to three weeks out; the only mega-cap left after this week.
War. Outlier: assuming it remains managed, the dispersion trade probably unwinds the way it normally does.
Views Evolved This Week
Dispersion — Carried as the dominant driver Mon–Fri; Friday escalated to “rare extreme”; today placed against the only comparable readings (fall 2025, tariff tantrum, COVID) and unwind timing tightened to midweek.
Mega-cap earnings as catalyst — Introduced Friday; today reinforced with two live post-print examples (Goldman, IBM) and the mid-Feb post-NVIDIA analog.
Cross-asset (oil/dollar / FX, central-bank divergence, tech CDS, 1Y CPI swap flag) — Active Mon–Wed; not re-addressed Thu–today.
Liquidity gauges (XLF, PSP, Bitcoin, RSP) — Restated through Friday; not re-addressed today.
Video
Commentary
Transcript Edited by Claude (Can Make Mistakes)
The Move Has Surprised Even Me
We saw the market continue to move higher this week. It’s not really all that surprising that it’s moving higher — what’s surprising to me is that it’s moved higher than I thought it potentially would. That’s because we’re seeing a very powerful implied-volatility dispersion trade taking place in the mega-cap names, and that trade is basically going to end at this point. By next week, it should largely be over and potentially should start to unwind.
NVIDIA’s results in about two or three weeks certainly pose another issue, but I’m not going to focus on that today, because I don’t think it really helps us by very much at this moment in time.
Index Divergence: New Highs In Some Places, Not Others
If you’ve noticed, the S&P obviously has gone on to make a new high, and the Nasdaq has gone on to make a new high. But if you also notice, the Dow has not, and the RSP has not. The Dow Transports have gone on to make a new high, but there’s all sorts of crazy things going on there with Avis. Avis being in the Dow Transports has really skewed that average, and it’s not the first time that’s happened — so I would not even pay attention to that. You can also see small caps have gone to a new high.
So there’s a lot of different things going on in the market, and what’s really driving a lot of this is dispersion.
SPY vs. RSP — The Cleanest Read
You can get a really good sense of this just by looking at the SPY divided by the RSP. The SPY is the market-cap-weighted ETF, and the RSP is the equal-weight ETF, meaning every stock in the RSP has the same input — NVIDIA is just as important as, let’s say, Macy’s. Whereas in the S&P 500 market cap, NVIDIA is a giant and nothing really compares.
This is what’s ultimately driving things, and it’s called dispersion.
The DSPX And Its Historical Context
There’s actually an index that monitors dispersion — it’s called the S&P 500 Dispersion Index. When dispersion is high, you tend to see the dispersion index rising. Right now, the dispersion index is quite high. It’s telling us that the dispersion trade essentially is quite crowded.
This index doesn’t go back all that far — to around the middle of 2014. Based on where we are right now, we’re certainly at one of the higher points in time. In fact, the dispersion index has only been higher on a couple of occasions: the fall of 2025 (if you go back and find videos on this channel from October and November of that timeframe, you’re going to see I was talking about exactly the same thing), the tariff tantrum, and COVID.
So the dispersion index can rise during times when there’s lots of market volatility and things are going awry. But really, what it does more on a quarterly and cyclical basis is go up into earnings season and then come back down after earnings season.
The Mechanic — VIXEQ Minus VIX
This has to do with implied volatility levels. It starts with the S&P 500 constituent implied volatility, and it goes through the S&P 500 implied volatility — which is the VIX. Essentially, if you take the VIXEQ and subtract the VIX from it, what you get is dispersion. If you overlay the DSPX on top of that, you basically see they become the same chart.
So when constituent volatility is high or rising and the VIX is going down, that pushes the implied dispersion index up. What you’re getting there is an implied-volatility dispersion trade — meaning that you’re long single-stock implied vol and you’re shorting index vol. That pushes index vol lower, pushes the VIXEQ higher, and creates the dispersion trade.
Eventually, the dispersion trade unwinds, because the VIXEQ comes down once earnings season passes.
Goldman And IBM — Live Examples Of The Vol Crush
You have very easy ways to look at this, even on TradingView. You can pull the VIX on Goldman Sachs, for example. Going into earnings, the VIX on Goldman Sachs would rise. Goldman has already reported, and so it’s not surprising the VIX on Goldman has come all the way back down.
The VIX on IBM is another one. That also rose rather sharply going into earnings, and now that they’ve reported this week, it’s all the way back down.
It happens very regularly. In fact, you can almost put a sine graph on it. This trade is very cyclical in nature — it basically happens on a seasonal pattern. You can see it in July of 2025, September of 2025, October of 2025, January of 2026, and here we are again in March of 2026. These are all months where companies start reporting earnings.
Amazon And Meta — Elevated IV Going In
Right now, the mega-cap names haven’t really reported yet. Take Amazon — the VIX on Amazon is kind of elevated. After the company reports results, the VIX on Amazon will come down sharply. That will happen this week, because essentially the event risk of earnings is gone.
What will happen ultimately is that the VIXEQ will begin to come down as well, ideally.
That’s partially why you’ve seen stocks like Meta go parabolic. If we look at the implied volatility of Meta — the one-week at-the-money implied vol — it’s gone up rather dramatically as we approach earnings next week. You can also see that it will come down rather sharply once results pass.
The War As A Wildcard
Of course, there’s the war, which is an outlier, and we don’t really know how that will affect the dispersion trade ultimately. But assuming the war continues and is managed, then it’s more likely than not that the dispersion trade probably unwinds like it normally does.
If that’s the case, the DSPX should begin to decline. Once that begins to happen, that’s essentially when you begin to see the S&P 500 probably start to give back some of the gains we’ve seen more recently.
The February Template
You can see this exact pattern earlier in the year. In the middle of February — basically right after NVIDIA reported — the dispersion index came all the way down, and the S&P 500 came down with it. The dispersion index started turning back up in mid-March, really took off on the 23rd, and the S&P was actually still going lower at that point. Then it started coming down more sharply.
It’s not a perfect indicator, because there are other things that go into it, but right now it’s telling us there’s a dispersion trade going on.
What Comes Next If The Trade Unwinds
What this sets up and tells us is that the VIXEQ is due to probably start coming back down. The dispersion trade will probably begin to unwind. The big moves we’ve seen in some of the mega-cap stocks will likely give back some, and may fade as that trade is unwound.
It’s quite possible that as the trade is unwound — and the long implied-vol position on single stocks comes down — the short position on index implied volatility begins to get covered or unwound, and maybe that pushes the VIX back up some.
This Week’s Earnings Cluster
We’re at a point in time where this trade is probably about to expire. We have big mega-cap earnings coming up over the next week. Tesla has already reported. We have five mega-cap earnings coming up this week, which makes six having reported by the end of the week. Only NVIDIA will remain after that.
If this has all been about mechanical trades going on in the marketplace, then it’s likely that this will, like I said, begin to unwind by the end of the week.
Thin Volumes Amplify The Moves
When you look at volumes in the S&P, the volumes have been sort of nonexistent — which means it’s probably a lot easier to move stocks around today than it normally would be. Even on Meta, volumes have come down somewhat, although they’re not too low.
If we’re in a situation where market participants have thinned out, you’re obviously going to move markets a lot more quickly, and you can move them a lot more than you normally would once the top of the book is thinned out. I’m not going to really get into that today, but I think it’s important to realize.
Closing Notes
If you go back, you can watch videos. I’ve done this analysis almost every quarter now for a number of quarters, and I think for the most part, those have panned out the way I framed them. To some degree, some of them are going to be more severe than others, only because there are other factors that go in. But for the most part, this trade is set to expire midweek.
It’s been kind of annoying, because I know what’s happening — I just want to get through it already. I’d like to see the market just get back to functioning normally without the influence of this one trade, which seems to heavily be influencing things at this point.
Have a great rest of your week, and we’ll see where we are next.
Defined Terms
Dispersion Trade — A strategy that is short index volatility and long single-stock volatility. It profits when individual constituents move more than the index does. A rising DSPX and a widening dispersion-minus-correlation spread both indicate the trade is working — and, at extremes, crowded.
DSPX (CBOE S&P 500 Dispersion Index) — A benchmark that measures expected dispersion of S&P 500 component returns — how much the individual stocks are expected to move relative to the index. The series begins around mid-2014; readings at the current extreme are historically rare.
VIXEQ — The CBOE S&P 500 Average Implied Volatility Index — essentially the average implied vol of the individual constituents inside the S&P 500. The DSPX behaves almost identically to VIXEQ minus VIX.
VIX — The CBOE Volatility Index, which measures expected 30-day implied volatility on the S&P 500 itself. When dispersion-trade flows compress index vol while pushing single-stock vol higher, the VIX falls relative to VIXEQ.
Implied Volatility (IV) — The market’s expected future price movement priced into options. Earnings-dated IV typically peaks right before the print and collapses immediately afterward (”vol crush”) once the event risk is gone.
Single-Stock IV Indexes (e.g., VIX-on-Goldman, VIX-on-IBM, VIX-on-Amazon) — CBOE-style implied-volatility indexes for individual stocks. Used here as live indicators of the pre-earnings vol build and post-earnings vol crush.
RSP — Invesco S&P 500 Equal Weight ETF. Comparing SPY (cap-weighted) to RSP (equal-weighted) is a clean visual on whether the mega caps are doing the work or whether the rally is broad.
SPY ÷ RSP Ratio — The ratio of the cap-weighted index to the equal-weighted index. A rising ratio means the mega caps are outpacing the average stock — i.e., dispersion in motion.
Dow Transports — A price-weighted index of transportation stocks. Because it has relatively few names and is price-weighted, an outlier price (e.g., Avis) can skew the average and make it a misleading breadth read.
Top Of Book — The best resting bid and offer (and sizes) on a stock’s order book. When the top of book is thin, smaller orders move price farther than they would in normal liquidity, amplifying both rallies and selloffs.
Disclaimer
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