How the market is designed
Contango is undoubtedly the prime factor in determining UVXY’s price path, but there are many misconceptions about how this works and its true impact. Many postulate that since the daily roll happens at the end of the trading day, simply being long or short the shares before and then closing the trade after will net […]
How Contango Crushes UVXY Read More »
The downward history of UVXY can be attributed to three main factors; using a benchmark derived from futures in contango, beta slippage, and the reverting nature of volatility itself. Contango is the main driver of UVXY’s downside price path over the longer term. The daily roll from front month contract to second month contract, where
UVXY Decay Factors Read More »
How many times have you seen a trader predict that UVXY will go to $100, $500, or $1,000, no matter where is current price is or where VIX stands? As UVXY is a pure math equation, with a couple of assumptions, one can quickly calculate where its top might be. The first thing we need
How High can UVXY Go? Read More »
Knowing the theta decay and other market measures look at every day of the week including weekends, an opportunistic trader might conclude that the ideal theta to collect would be when nothing trades. Unfortunately everyone else knows that there is a weekend ahead and adjusts formulas accordingly. The most common method used in dealing with
The Weekend Effect Read More »
UVXY has weekly, monthly, and LEAPS options released on the following schedule New option expirations are added on Thursdays to replace the contract expiring the on next day. There are 5 weekly contracts, with a 6th available on Thursday and Friday when that Friday’s expiring contract is also a weekly. New monthly expirations are added
Option Expiration Schedule Read More »
First a little glossary; ETP stands for Exchange Traded Product which usually refers to anything that can be traded, typically instruments managed by issuers but could technically include equities and commodities. ETF stands for Exchange Traded Fund. These are regulated instruments that must be backed with the underlyings, or something equating them, that they track.
VIX and therefore UVXY are inversely correlated to SPX movements, but correlation is rarely perfect. The historical average is a correlation of -.80, or 80% of the time they move in opposite directions. This leaves 20% of trading sessions where they move the same direction, moving up or down together. For traders expecting perfect correlation
Correlation to SPX Read More »
Most ETPs along with many equities will perform splits to keep the trading price in a range that’s comfortable for traders, few are looking to stick with the no split policy used by BRK.AFor an ever declining underlying like UVXY, this means a reverse split to raise the price back up. UVXY has undergone 10
Unlike most underlyings, UVXY’s price is derived from the price changes in VIX futures (/VX). This is often confusing to traders that are accustomed to supply and demand factors to arrive at an agreed upon price by buyers and sellers. The formula is straightforward and relatively easy to calculate using the following inputs:: UVXY’s previous
Calculating UVXY’s Price Read More »
On my live screen I always have the following charts up: UVXY, /ES, VIX, /VX M1, and /VX M2. This gives me a complete picture as to the inputs for my trading. I’ll often include /CL and /ZN as checks on /ES movement to see if it’s a macro event or just a selected equity
Chart Watching for Relationships Read More »