Correlation trading

• Sell a call option on the index and buy a portfolio of call options on the individual constituents of the index. Although typically in practice, the trader would choose straddles instead of calls to minimize delta risk as its often not feasible to perfectly replicate the index with single stock options.;
• Sell a variance swap on the index and buy the variance swaps on the individual constituents; this particular kind of spread trade is called a variance dispersion trade.
• Sell a correlation swap.