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ProShares Short VIX Short-Term Futures Message Board

  • judge_smailes8 judge_smailes8 Jun 6, 2013 3:03 AM Flag

    SVXY is not a long term buy-and-hold ETF

    The VIX Short-Term Futures Index was introduced in 2007 and daily values were retroactively determined dating back to December 2005. I was able to access a chart of daily closing values for the index through my Ameritrade account and I used this data to determine how an inverse VIX short-term futures index (such as the one tracked by SVXY) would have performed between December 2005 and June 2013 and I can tell you that based on what I see, SVXY is definitely not a buy-and-never-sell ETF.

    An inverse VIX short-term futures index would have increased about 100% during this entire time period, which is a gain of about 9.78% per year. Obviously this is a higher return than the S&P 500 returned during the same time period, but it is far less than Bobwins thinks it will return.

    FYI, the VIX Index soared from a closing value of 9.90 on 11/21/06 to a value of 80.86 on 11/20/08. During that time period, an inverse VIX short-term daily futures index would lost about 90% of its value.

    I suppose it is possible that the returns during this time period are atypical and are artificially depressed because the VIX soared in 2007 and 2008 during the possibly one-every century financial crisis, but we probably should expect to see some type of market crisis every decade or so which will send the VIX soaring and will destroy accumulated gains for SVXY.

    In my opinion, the way to make money on SVXY is to periodically sell to lock in gains or purchase more shares when SVXY is down.

    Sentiment: Strong Buy

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    • how can you say it's not a buy and hold if it would have returned more than the S & P during that time? that means by buying and holding you would have beat most fund managers. don't see anything wrong with that. and if you added to your shares every time the market was down, you'd be doing even better. and getting your returns this way would require a lot less time, effort, stress, and risk than constantly trading and trying to time the market.

    • I like your analysis and your recommendations.

      I would add that the best time to sell SVXY is when the spot VIX is near 18 and the best time to buy it is when the SPOT VIX is below 15.

      Question for you- you mention about selling to lock in gains. What is your thought about selling monthly covered calls for a price $5-$10 higher than current prce. This allows you to keep your shares (most of the time) as well as earn some income on your investment (could also be intrepretated as selling part of your holdings).

    • The 2007-08 was a particularly sharp bear market, so I suppose it is possible that we won't see anything quite as bad for decades, in which case maybe it would make sense to hold SVXY for a multi-year period.

      I do wonder how SVXY would perform if the S&P 500 Index were to experience an epic bull market such as the one between 1982 and 2000 - could SVXY have risen +20,000% during a bull market like that one?

      The 2000-02 bear market was much longer than the 2007-08 bear market, so I wonder whether SVXY would have lost more than 90% during that bear market.

      Sentiment: Strong Buy

 
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