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ProShares Short VIX Short-Term Futures Message Board

  • bobwins_o_phile bobwins_o_phile May 19, 2013 1:39 PM Flag

    Smalls would you be long SVXY or short UVXY?

    I think being short with 15% UVXY would do better than long 33% SVXY, as long as you re balance and add to the short position as UVXY drops. Thoughts? I believe UVXY will decline 20% per month on average, so if you have 15% of your money short you would average 3% per month on your whole portfolio. Now granted it could go up 10 fold and you lose the whole thing if you get in at the wrong time.

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    • I personally would rather be long SVXY. I have serious concerns about what would happen to holders of UVXY short positions if the market were to crater as it did in 2008. I suspect that a lot of shorters would be forced to cover their short positions at inopportune times. I have calculated that if UVXY had been in existence in 2008, it would have increased in value by around 1,450% during the three-month period between 8/28/08 and 11/20/08.

      If I were to short UVXY, I would probably do so maybe once a week and cover each individual short position each time the price of UVXY dropped say 15 or 20% below the price at which I shorted the shares.

      I personally prefer to short TZA. TZA won't drop as quickly as UVXY, but it also won't spike as sharply in a market downturn. I also have never had difficulty shorting TZA, whereas there were no shares of UVXY available for shorting when I attempted to do so.

      If you really want to make money shorting a VIX derivative, why not simply short VXX? Obviously VXX won't drop as quickly as UVXY, but I think that the risk of being forced to cover the position during a short squeeze has to be much lower, given the far greater market cap of VXX.

      Sentiment: Strong Buy

    • when it goes 10 fold - that's when I would do a synthetic short. last time it spiked in Dec, I did sell bunch of naked calls - some as far a Jan 14 45 calls sold for $10. Mistake I made was I did not buy puts with that call money .. If I had done that, that would have paid handsomely as UVXY dropped from 30s to 5s now!

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