The ProShares Ultra VIX Short-Term Futures Fund yesterday saw its largest action since it began trading less than six months ago.
The UVXY finished yesterday at 14.52, down fractionally on the session after hitting an all-time low of $12.60 a week ago. The exchange-traded fund has fallen from above $140 in late November and above $200 in early October.
The fund aims for a return that is twice the daily return for the Short Term VIX Futures Index, which comprises the two nearest- month VIX futures with a daily roll. The normal structure of the VIX futures in contango--increasingly higher premiums in later-dated contracts--hurts the fund. While the VIX was at 15.64, the April futures were at 17 and the May contracts at 18.90.
The April 23 calls were most active, mostly selling for $0.40. The April 26 calls were next in volume and sold for $0.25. The April 24, 25, and 27 calls were all sold as well, for $0.40, $0.30, and $0.25 respectively.
This call selling is a bet that the UVXY will stay below $23 in the coming weeks. Those calls are all far out of the money, but the fund can jump quickly.
The calls may have been sold naked as a high-probability but ultimately risky trade, or they could have been traded against long shares as covered call positions. (See our Education section)
More than 4,600 UVXY options traded yesterday, compared to a daily average of 675. Calls outpaced puts by 8 to 1.
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