ProShares Short VIX Short-Term Fut ETF Message Board

If the S&P 500 gains 30% in 2013 without a significant correction, then UPRO may hit 200 by the end of the year. Absent a recession, UPRO may touch 300 by the end of 2014. The FED seems to be doing everything in its power to pump the stock market, so I expect UPRO to go much, much higher from here.

Sentiment: Strong Buy

Go ahead and do that at your own peril. The S&P 500 is up over 17% so far in 2013, but it could go much higher given the FED pumping. Companies are using the cheap financing to borrow money to buy back shares or refinance debt, which helps to improve their profitability and stock price even if revenue growth is less than impressive. It wouldn't surprise me to see the S&P 500 close out 2013 with a +30% gain despite the anemic economic growth.

Sentiment: Buy

I agree that the market may be due for a pullback that could cause SVXY to quickly drop 30%. However, even if that does happen, it would not surprise me to see SVXY close out 2013 in the 130s.

Did anyone who owned SVXY last year receive a K-1 tax form from Proshares? I only started purchasing SVXY in 2013 in an IRA myself.

Sentiment: Strong Buy

I only found out about SVXY at the end of last year. My plan is to purchase equal dollar amounts of SVXY at regular intervals and rebalance periodically to lock in gains or add to my positions.

For example, if I choose a 12-month holding period, I may invest, for example, $1000 (or whatever amount) in SVXY shares at the end of each month in 2013, so that I essentially have 12 distinct positions in SVXY. After the initial 12 months of investments, I will rebalance each position exactly 12 months after it was initially purchased.

So, if I purchased $1000 of SVXY on 1/31/13 and SVXY triples by 1/31/14 such that my January position is now worth $3000, I plan on rebalancing the January position back to $1000 - e.g., in this case, I would sell $2000 worth on SVXY in January 2014 so that the value of the January position is back to $1000.

If, on the other hand, SVXY were to drop say 50% between January 2013 and January 2014, so that the value of my January position is only worth $500, I would purchase an additional $500 worth of SVXY so that my January position is again worth $1000 after this rebalancing.

I would also do the same thing for separate positions for February, March, April, ... through December.

12 months is just an example, but my particular strategy is predicated upon the belief that SVXY is generally in an upward trend and most of the rebalancings will result in selling shares to lock in capital gains as opposed to purchasing additional shares when SVXY has fallen.

I may extend my holding periods to longer than 12 months, such as 24-months or longer. However, I do think that it is critical to have a plan to sell shares that have increased in value at periodic intervals to lock in gains.

Sentiment: Strong Buy

It will absolutely lose a lot of value quickly in a rough bear market. The VIX Inverse Short Term Futures Index is the same index tracked by SVXY and I was able to obtain daily closing values for that index dating back to January 2008. During that time period, the VIX Inverse Short Term Futures Index has plummeted several times, although it eventually has continued to hit new highs. The value of the Index as of the market close on April 29, 2013 is 298,958.76. The all-time closing high for the Index during the period of time I have tracked was 339538.6 on April 12, 2013.

These are some of the notable drops in the Index value as of the daily market closes:

(1) The Index closed at 120,998.36 on May 19, 2008 and then plummeted to a trough of 20,441.838 on November 20, 2008. During this 6-month period of time, the Index lost about 83.1% of its value;

(2) The Index closed at a value of 108,307.84 on April 23, 2010 and dropped to a value of 50,931.994 on May 20, 2010. During this 1-month period of time, the Index lost about 52.97% of its value;

(3) The Index closed at a value of 249,034.47 on July 7, 2011 and dropped to a value of 63,063.906 on November 25, 2011. During this 4.5 month period of time, the Index lost about 74.68% of its value;

(4) The Index closed at a value of on 175,050.94 on March 26, 2012 and dropped to a value of 106,565.38 on June 1, 2012. During this 9-week period of time, the Index lost about 39.12% of its value.

SVXY probably is due for at least a 30-40% pullback sometime this year, although I have no doubt it will quickly resume its upward trajectory. I will use the pullbacks as an opportunity to purchase more shares.

Sentiment: Strong Buy

Thanks. So does contango arise because speculators are betting on an increase in volatility and are therefore willing to pay more for the 2-month VIX future than they are for the 1-month future?

Sentiment: Strong Buy

The Spot VIX closed at $13.72 today, an increase of (0.81%). Now if SVXY was 100% inversely correlated, I agree that it would have dropped 0.81%. Instead, it increased about 0.52%. Isn' t the difference a result of contango? In other words, contango added a total of 1.33% to the returns of SVXY today?

Sentiment: Strong Buy

I thought that contango was the exact reason why the returns for the VIX Short-term futures index differ from the returns of the VIX index. Am I incorrect?

Sentiment: Strong Buy

I don't know about this week, but TZA will probably dip below $35 in May. The only people making money consistently on TZA are the shorts.

Sentiment: Strong Sell

Thanks. So if I wanted to figure out the difference over a period of time caused by contango or backwardation, would I subtract (a) the total return of the VIX Short Term Futures Inverse Daily Index from (b) an index that returned the inverse % of the actual VIX Index on a daily basis?

Sentiment: Strong Buy

I think that contango should be calculated by subtracting the difference between the VIX Short Term Futures Inverse Daily Index and an index that returned the inverse % of the VIX Index on a daily basis. So if an index that returned the inverse % of the VIX Index on a daily basis is the appropriate benchmark, then the contango in 2012 was 211.172%.

Sentiment: Strong Buy

By the way, you need to be very, very careful about shorting UVXY. Although UVXY will usually be quickly dropping in value, every once in awhile, the short term VIX futures index will rocket higher during a panic. Between 8/28/08 and 11/20/08, the short term VIX futures index rose from 53010.19 to 231276.82. That is an increase of 336% in just under 3 months. However, a product which moved exactly twice the percentage movement of the underlying index would have increased about 1,450% during the same time period. I think that if you were short at a time like that, you would have either received a margin call or your broker would have forced you to cover your position at an inopportune time.

Sentiment: Strong Buy

Which brokerage do you use? I assume it isn't Ameritrade?

Yes, the US stock market will undoubtedly crash at some point, just like it did in 2000-02 and 2008-March 09. Even SVXY will probably crash at some point, losing maybe 80% or more of its value during a multi-month bear market.

I think that the only way to make money on leveraged ETFs is through a periodic rebalancing strategy. For example, if you put $5k in SVXY on 4/30/12, rebalance the position back to $5k at regular intervals. For example, you could do this every three months, so that if (a) the position has increased 50% to $7500, you would sell $2500 worth of SVXY; or (b) the position has decreased 50% to $2500, you would buy an additional $2500, so that the value of your position in SVXY is exactly the same after each rebalancing. This is how I invest/speculate in long positions with leveraged ETFs. With SVXY, you might choose a longer period between rebalancings, such as greater than 12 months so that you are only subject to long-term capital gains instead of short-term capital gains.

Sentiment: Strong Buy

By the way, if LBJ tracked exactly three times the daily % movements of its underlying index, it would has risen more than 10,000% during the March 2003 - May 2008 emerging markets and Latin American bull market. I don't foresee another 5-year bull market in Latin American stocks anytime soon, although it would not surprise me to see a powerful 3-year bull market in Latin American stocks at some point, which could propel LBJ maybe 1500-2000% higher.

The Emerging Markets leveraged ETFs seem to be boom-or-bust for the most part.

Sentiment: Strong Buy

I up a little bit over the past 12 months. LBJ is my largest leveraged ETF holding and for the most part it has either moved sideways or down during most of the past 3 years. Brazil will eventually get things right and its stock market will rally strongly, causing LBJ to rocket maybe 300-400% in a 12-month period, although I cannot say when that will happen - it might take a few years before that happens.

I am up on all of my other leveraged ETF positions, which more than make up for my current unrealized losses on LBJ. I have been buying TQQQ, UPRO, and SVXY. SVXY should eventually be my biggest winner.

As of right now, my best leveraged ETF has been a short position on TZA. VXX might be another good leveraged ETF to short, although I have never personally shorted VXX. I wanted to short UVXY, as I mentioned earlier in this thread, but was unable to do so.

Sentiment: Strong Buy

Shorting UVXY in theory is definitely more profitable than going long SVXY if no no other reason than the fact that UVXY is a doubel-leverage product. However, it is difficult to find shares to short. I was unable to short UVXY through my Ameritrade account when I tried to do so earlier in the year.

Sentiment: Strong Buy