The stock symbol UVXY is a popular choice among traders and investors, but it's essential to understand what it represents before making any investment decisions.
UVXY is an inverse ETF that tracks the daily performance of the S&P 500 index, but with a twist: it aims to provide a return that's the opposite of the S&P 500's daily performance.
Investors use UVXY as a hedge against potential market downturns, hoping to profit from market volatility.
The fund's goal is to provide a return that's 2-3 times the inverse of the S&P 500's daily performance, making it a high-risk, high-reward investment.
For more insights, see: Proshares Short S&p 500 3x
Index: Performance
The VIX Index and VIX futures, as seen in the 9-year performance chart, show a dramatic difference in performance over time. This is a key consideration for investors looking at UVXY.
UVXY is a leveraged ETF, which means it can amplify gains and losses. In contrast, unleveraged ETFs like VXX track VIX futures without amplification.
Check this out: Inverse of Vix Etf
The 9-year performance chart highlights the significant deviation between the VIX Index and VIX futures. This difference is crucial for investors to understand when considering UVXY.
UVXY's performance can be compared to unleveraged ETFs like VXX over a 5-year period. This comparison is essential for investors to gauge the impact of leverage on UVXY's performance.
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Volatility
Volatility is a key concept when it comes to the stock symbol UVXY. The fund is designed to track the returns of a portfolio of monthly VIX futures contracts with a weighted average of one month to expiration.
The S&P 500 VIX Short-Term Futures Index, which UVXY tracks, is considered a hedge against large and sudden drops in the equity market. It has historically had a negative correlation to the S&P 500 index.
The fund's underlying index rolls positions from first-month contracts into second-month contracts on a daily basis. This means that UVXY is closely tied to the volatility of the S&P 500 index.
For more insights, see: Stock Symbol for S&p 500
Here are some key characteristics of the S&P 500 VIX Short-Term Futures Index:
UVXY seeks a return of 1.5 times returns of its underlying index for a single day, according to its prospectus.
Volatility ETFs Crash
The US stock market had a soft start to the year due to rising fears of a faster QE taper.
Fears of a faster QE taper led to a subsequent withdrawal of cheap dollars, which contributed to the market's volatility.
This scenario took a turn for the worse as emerging markets began to slow down.
The U.S. stock market saw a sharp decline in volatility ETFs as a result of these market fears.
These ETFs are designed to track the market's volatility, so a sharp decline in their value is a clear indication of the market's instability.
The scenario is a reminder that market volatility can be unpredictable and can have a significant impact on investments.
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A faster QE taper can lead to a withdrawal of cheap dollars, which can have a ripple effect on the market.
The market's reaction to these fears highlights the importance of staying informed and adaptable in the face of market volatility.
In this case, the market's fears led to a sharp decline in volatility ETFs, which can have a significant impact on investments.
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Volatility ETFs Surge on Market Weakness
January was a month to forget for equity investors, as broad markets took a step back to start the year.
The ProShares Ultra VIX Short-Term Futures ETF (UVXY) is an exchange-traded fund that provides leveraged exposure to the S&P 500 VIX Short-Term Futures Index.
It measures the returns of a portfolio of monthly VIX futures contracts with a weighted average of one month to expiration. This makes it a great option for those who want to profit from increases in the expected volatility of the S&P 500.
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As of the end of 2021, the fund has an expense ratio of 0.95%, which is relatively low compared to other ETFs.
The S&P 500 VIX Short-Term Futures Index has historically had a negative correlation to the S&P 500 index, making it a hedge against large and sudden drops in the equity market.
ProShares Ultra VIX Short-Term Futures ETF seeks a return of 1.5 times returns of its underlying index for a single day, according to its prospectus.
It's designed for investors who seek to profit from increases in the expected volatility of the S&P 500 and those who seek reduced US equity portfolio risk.
The fund is intended for short-term use, and it's recommended to monitor UVXY holdings as frequently as daily, as compounding of returns over periods other than one day is likely to differ in amount and possibly in direction from target return.
It's worth noting that UVXY does not track the performance of the Cboe Volatility Index (VIX) and can be expected to perform very differently from the VIX.
Take a look at this: Stock Symbol for Vix
Contango Backwardation
Contango occurs when VIX futures contracts trade at a premium to the VIX index.
In this situation, the VIX futures are in contango, and UVXY tracks the daily performance of the two nearest monthly VIX futures.
The VIX futures contracts being in contango can impact the performance of UVXY, making it a consideration for investors.
UVXY tracks the daily performance of the two nearest monthly VIX futures, such as February and March, which can help investors understand the contango situation.
Investors can use the contango situation to their advantage by understanding how it affects UVXY's performance.
Contango can be a temporary market condition, and understanding its impact on UVXY can help investors make informed decisions.
UVXY's performance is directly tied to the contango or backwardation of the VIX futures contracts.
Backwardation, on the other hand, occurs when VIX futures contracts trade at a discount to the VIX index.
The rate at which UVXY decays can be influenced by the VIX term structure, which can provide insight into the backwardation situation.
UVXY's decay rate can be a significant consideration for investors, particularly in a backwardation market.
Investors should be aware of the contango or backwardation situation when considering UVXY as an investment option.
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Frequently Asked Questions
How do I buy UVXY stock?
To buy UVXY stock, create an eToro account, deposit funds, and search for the ProShares Ultra VIX Short-Term Futures ETF to place a buy order. Follow the on-screen instructions to complete your purchase.
Is UVXY a good buy?
Based on technical indicators, UVXY is not a good buy, as it's considered a Strong Sell. However, its RSI suggests a neutral sentiment, making it worth further evaluation.
What is the difference between UVXY and VIX?
UVXY is a tradable ETF that offers leveraged returns, whereas VIX is an indicator that measures market volatility, not a security that can be bought or sold
What is ProShares Ultra Vix short-term futures ETF?
The ProShares Ultra VIX Short-Term Futures ETF offers leveraged exposure to the S&P 500 VIX Short-Term Futures Index, tracking the returns of monthly VIX futures contracts. It's designed for investors seeking to capitalize on short-term market volatility.
What is the difference between UVIx and UVXY?
The main difference between UVIX and UVXY is their expense ratio, with UVXY being significantly cheaper at 0.95% compared to UVIX's 2.78%. This disparity in fees may impact investment returns, making UVXY a more cost-effective option for investors.
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