As an intellectual exercise, I was thinking that 3Xers with decay seem like sure fire shorts. But usually there are pros and cons so I will start the convo. UVXY and TVIX both are derivatives of the VIX (which seems to have died the last couple years). They also both decay and reverse split every few months. So would it not make sense to just short them and hold indefinitely? Let's hear the pros and cons.
Not certain why folks want to reinvent the wheel. Just trade ES with 3 times leverage----What gives here?
In light of observable history of half-a-dozen events in the last few years... Two questions: #1) what would make the VIX jack from 11 to 25? #2) is the answer to #1 predictable. Are we done yet? No?? #3) what happens to my account, *when* the events cited in #1 come to "actuation"?? (answer: then the account goes #2 all over itself.)
If you are short UVXY or TVIX, you are leveraged short the VIX. That's a very dangerous place to be - especially overnight - if and when the VIX explodes.
Take a look at the charts for them though, looks like a killer trade and any pops are super short lived. (playing devil's advocate here)
%% Decay sounds like it could be good trend; but after reading the prospectus. It's NO; or simply ''sure fire'' speed reading the charts there in.
Just open an excel spreadsheet and you will see how ES long outperforms shorting the volatility ETF by a factor of 10. This is comparing dollar to dollar return on margin.
"[...], but we do have historical data for the 2011 correction, where UVXY’s value went up 550% in a few months. In my simulation of UVXY’s prices that goes back to 2004, I show that that the prices of UVXY would have gone up 15X in the 2008/2009 crash." -- https://sixfigureinvesting.com/tag/uvxy/ . By the way, I do or have done trades similar to both strategies that you mentioned (in effect, shorting leveraged ETF's across rebalancing periods or shorting volatility), but guided by observations like the above.