Is uvxy a good investment?
As mentioned in the beginning, UVXY is destined to be a loser. Stay invested in this ETF for too long, and the most likely outcome is capital loss. Therefore, before stepping into this fund, traders should already have a clear exit plan in mind.
Thankfully there is. In fact, you can even profit from volatility and extreme fear in the markets by trading a single ETF. The ProShares Ultra VIX Short-Term Futures ETF ($UVXY) provides leveraged exposure to the S&P 500 VIX Short-Term Futures Index.
UVXY is an ETF which is tracking the S&P 500 Short-Term VIX Futures Index on a 1.5x leveraged basis. This index is provided by S&P Global and it relatively straightforward: it holds a basket of first and second month VIX futures such that the average holding is 30-days into the future.
UVXY simply isn't that useful for anything other than perhaps day traders. It doesn't work as a long-term investment; the combination of negative roll, leverage, and markets that go up over time are a toxic trio.
The ProShares Ultra VIX Short Term Futures ETF (UVXY) is a fund that in very simple terms tracks short-term volatility. Which means it's basically made to go down. The market goes up and the UVXY goes down. That's what normally happens.
If UVXY is trading enough below the IV value they start buying large blocks of UVXY—which tends to drive the price up, and if it's trading above they will short UVXY.
Traders look to purchase UVXY when they think there will be a sharp increase in volatility. Buying UVXY equates to, more or less, direct exposure to the two most active (near-term) VIX futures. As long as VIX futures are in contango and volatility doesn't increase, UVXY will lose money every month.
The same pretty much happens on most rolls outside of extreme market volatility when the front month contracts rise above the rest of the futures curve. This negative roll persists for 80-90% of the year in most years and UVXY loses money with surprising consistency.
UVXY does not currently pay a dividend.
ProShares Ultra VIX Short-Term Futures ETF (UVXY) has announced a 1-for-10 reverse stock split. As a result of the reverse stock split, each UVXY Share will be converted into the right to receive 0.10 (New) ProShares Ultra VIX Short-Term Futures ETF Shares.
Can I hold UVXY?
UVXY can rise up sharply when $VIX surges up rapidly intraday, but as soon as volatility starts to drop even just a bit, UVXY can drop very rapidly. You may see a big gain turns into a big loss very quickly. Therefore, we don't hold UVXY for any longer than 1-2 days in this kind of setup.
So, if you're asking yourself if now is a good time to buy stocks, advisors say the answer is simple, no matter what's happening in the markets: Yes, as long as you're planning to invest for the long-term, are starting with small amounts invested through dollar-cost averaging and you're investing in highly diversified ...
| Event | Dates | Inception / close price right before reverse split (split adjusted) |
|---|---|---|
| Leverage Shift from 2X to 1.5X | 28-Feb-2018 | |
| 9th Rev. Split | 18-Sept-2018 | 7.36 |
| 10th Rev. Split | 26-May-2021 | 3.81 |
| 10th Rev. Split | 15-July-2022 (estimate) | ~ $8 |
Investment Objective
ProShares Ultra VIX Short-Term Futures ETF seeks daily investment results, before fees and expenses, that correspond to one and one-half times (1.5x) the daily performance of the S&P 500 VIX Short-Term Futures Index.
| Ticker | Name | 1 Week Return |
|---|---|---|
| (UVXY B-) | ProShares Ultra VIX Short-Term Futures ETF | 32.96% |
| (GDXD) | MicroSectors Gold Miners -3X Inverse Leveraged ETNs | 16.77% |
| (JDST ) | Direxion Daily Junior Gold Miners Index Bear 2X Shares | 14.15% |
| (ZSL A) | ProShares UltraShort Silver | 13.37% |
UVXY offers daily leveraged exposure to short-term VIX futures, designed to capture the volatility of the S&P 500, in a commodity pool wrapper. As a geared product with daily resets, UVXY is designed as a short-term trading tool and not a long-term investment vehicle.
However, UVXY has one key advantage: it performs extraordinarily well when the broad stock market tanks. This is the case because the ETF establishes a 1.5-time long leveraged position in short-term VIX futures. The VIX, also known as the fear index, is a metric that rises when volatility in the market is high.
| Date | Ratio |
|---|---|
| May 26, 2021 | 1:10 |
| Jan. 12, 2017 | 1:5 |
| Jul. 25, 2016 | 1:5 |
| May 20, 2015 | 1:5 |
For example, in a 1:4 reverse split, the company would provide one new share for every four old shares. So if you owned 100 shares of a $10 stock and the company announced a 1:4 reverse split, you would own 25 shares trading at $40 per share.
On 4/23/2021, the iPath Series B S&P 500 VIX Short-Term Futures ETN completed a 1-for-4 reverse stock split. As of 4/23/2021, shareholders hold 1 share of VXX for every 4 shares previously held.
Can an ETF go broke?
Plenty of ETFs fail to garner the assets necessary to cover these costs and, consequently, ETF closures happen regularly. In fact, a significant percentage of ETFs are currently at risk of closure. There's no need to panic though: Broadly speaking, ETF investors don't lose their investment when an ETF closes.
Because of their wide array of holdings, ETFs provide the benefits of diversification, including lower risk and less volatility, which often makes a fund safer to own than an individual stock.
Generally, yes. The S&P 500 is considered well-diversified by sector, which means it includes stocks in all major areas, including technology and consumer discretionary—meaning declines in some sectors may be offset by gains in other sectors.
Take the ProShares Ultra VIX Short Term Futures ETF (UVXY). Since March 2012, according to Splithistory.com, an online database of splits and reverse splits on U.S. stock exchanges, the fund has reverse-split nine times.
ProShares VIX Short-Term Futures ETF (VIXY) has announced a 1-for-4 reverse stock split. As a result of the reverse stock split, each VIXY Share will be converted into the right to receive 0.25 (New) ProShares VIX Short-Term Futures ETF Shares.
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| Metric | Metric Realtime Rating | A+ Metric Rated ETF |
|---|---|---|
| Expenses | B | SVXY |
| Performance | ||
| Volatility | ||
| Dividend |
- Selling The UVXY Short Over The Long Term. One can profit from the VIX by shorting it over the long term. ...
- Buying UVXY At Times. Buying the UVXY at times instead of shorting it all the time can also be profitable, as illustrated in the weekly chart, showing the UVXY's peaks and troughs below.
VIXM, VXZ, and VIXY are the best VIX ETFs for Q2 2022.
Regardless, the point I want to stress here is this: yes, SVXY is a good buy, and yes, it is likely going to continue pushing higher, but firm risk management hedges must be in place to trade this instrument in my opinion.
The ProShares Ultra Short S&P 500 (SPXU) is a leveraged ETF that aims at a return that is three times the inverse of the daily performance of the S&P 500 Index.
