You can read about this fund at http://www.proshares.com/funds/uvxy.html . It is priced similar to VXX and VIXY. All three are based on a mixture of the two front month VIX futures contracts. The VIX futures contracts are priced at what traders think VIX will be on the day they expire. They are somewhat affected by the change in the spot VIX, but usually move more slowly than it and sometimes move in the opposite direction. There is no investment vehicle that directly tracks the VIX, just futures, options, and ETFs and ETNs like VXX and UVXY. These funds continually sell the front month futures and buy the 2nd month futures. Since over 90% of the time the 2nd month futures cost more than the front month futures, these funds typically have a built in decay of 5 to 10% per month. Quite often, they lose value even on days when the market goes down.
thanks for the link and the info. btw UVXY is and ETF not ETN. ETNs I dont even look at- wouldnt even touch those things. as for UVXY, I have been watching it all year and seen people get burned by it time and time again. Given the 5-10%/month built in decay you mentioned, would a better strategy be to sell it rather than buy? Theoretically it could keep drifting down forever- everytime it gets to 2 or so just do another 1 for 10 reverse split (like they have done already) and keep doing that forever. Here is the question I wanted to ask: If we get a bear market like in Aug- Oct 2011 and the VIX goes to 60 (currently at 15), where would UVXY go to? UVXY closed at 19.60 yesterday and today may go below 19. Is it safe to say it could go to 80 if the VIX goes to 60? Thoughts?
it's safe to say that uvxy will give u a daily return real close to 2x the vix short term futures index.
If VIX quadruples to 60, UVXY may go up by around 8x. But if that doesn't happen until, say, next summer, UVXY may be in the single digits by then. Here's what I do: when VIX gets down to 15, I buy some UVXY and hold for up to a few days for a possible bounce. When VIX gets above 18, I wait for it to plateau and then possibly buy puts in VXX.
well, it didnt turn out exactly like I thought, but UVXY did get into the 17s (I had said 15) something tells me it has bottomed-I have some from a lower level going to buy more when I can anyone else getting long UVXY?
VIX at 13.83 UVXY 15 and change who would have thought that? well, im going to buy a bit more and bring my ave down the UVXY ETF almost has to explode upwards in the next few months or all historic analysis is negated. final post on this for now blackguard
I think this is one of the biggest waste of money decision you can make. Sure it's possible there are vix spikes this year, but youre going to park your money in something that has huge bleed everyday just to have it get to the single digits (or have a reverse split) and then hopefully pop back to your average cost. Etfs like this are not meant to be bought and held. f you really want to play woth these then try to build yourself some models to help you predict vix spikes and only buy this on your indicator. Seriously though, think about what youre doing with your money and how the etf works. What are you even looking for in this trade? It doesnt seem like low risk high reward to me (if you plan to hold it for a few months)
Averaging down into UVXY is wrong. WIth buying UVXY you have many things going against you. For example the monthly rolling, compounding effect due to leverage and daily rebalancing, etc. This said, it doesn't mean shorting UVXY is "free money", if you short you can make only 100%, but I can easily see scenarios where UVXY is up 10x if Vix goes up continuously and if the curve in vix future goes into backwardation. The problem with buying UVXY and doubling down is, if it does spike and go up you will probably cover as soon as you hit your breakeven point, and not benefit fullly from the whole move, so you are taking all the downside and just a bit of the upside. In my opinion a good way to play this, if one thinks volatility is low, is to buy some way out of money calls on UVXY for a very small percentage of the portfolio and hold it till expiration, with the expectation that 90% of the time they will expire worthless, and just do it again next month. This way your losses won't be too painful, and you will be properly compensated if something exciting does happen. Anyways, from all the markets, instruments, etc, I find trading volatility the hardest, and personally don't do it much.
UVXY 13ish VIX 13 and change are we entering a new paradigm? VIX goes to 10 or below? UVXY down below 5 again? thoughts?