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ProShares Ultra VIX Short-Term Futures Message Board

  • patwrinklebottom patwrinklebottom Mar 19, 2012 11:49 AM Flag

    Does this thing make sense to anyone?

    I don't get it. Who the hell knows why it moves the way it does? Is it just a giant scam run by one of Goldman's algo computers on the floor of the NYSE?

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    • It makes perfect sense and you need to trade accordingly. Nice profit shorting this as we are in contango. Get long when in backwardation. You shouldn't trade this if you don't understand it.

    • Now it's 4.63% and 9.24% down. Almost a perfect 2:1 correlation to the Apr 12.

    • Makes perfect sense. XIV has gone up above 3%
      UVXY doen over 7%.

    • Now, mathematically here's what I see: the VIX is lower teens and the future Apr 12 is in the 21 range. When we get into the month, the Apr 12 becomes more relevant but UVXY doesn't reprice from the lower teens to the 21 value. Instead it "jumps" to the 21 value as the relative base from which to decline and we do it all over again. By the time that declines to the lower teens, UVXY is much lower in price. Thus, it appears that mathematically this thing has a built in decay feature unless you get a sudden spike in the VIX. Just the observation of a novice here.

    • I'm pretty new to this, made some $$$ by luck, losing today because I'm a dumbass, even overall. What I see today is that it is moving just as promised compared to the US SPX VIX Apr 12. That is down 3.94% and UVXY is down 7.59%. Was closer to 8% earlier.

      • 1 Reply to jwm1031
      • Rule 1. Never put money in something that you're not familiar with.

        You, obviously, have no understand of the VIX or VXX or UVXY.

        This is certainly not a scam. There's certainly nothing wrong with VXX or UVXY.

        So, let me kick down a little knowledge to you.

        VIX, VXX, and UVXY move mostly inverse to S&P 500. The S&P 500 has been done nothing but climb since mid-December. If the VIX, VXX, and UVXY is inverse to the S&P 500, logical would say that they have done nothing but fall during the same time period.

        If you sell anything for cheaper than you buy something, your value will drop.

        In VXX, you're essentially selling 1st month VIX contracts for lower than you're buying 2nd month VIX contracts prices for. This is called contango and this is why the price continues to decline for the VXX and UVXY.

        Now, if for whatever reason you sold 1st month VIX for more than you bought 2nd month VIX contracts for. Sell for 2, buy for 1. The VXX and UVXY would sky rocket. That's called backwardation and is rare.

        So, this is how the VXX and UVXY works. They are mostly in contango, decreasing in value. But rarely, they go into backwardation and sky rocket and then go into contango again and continue to decrease in value.

 
UVXY
15.05-1.97(-11.57%)May 2 4:00 PMEDT