Why UVXY Is Hemorrhaging Money

The Option Pit VIX Light Is Red, and Volatility Is Likely to Drop.


Hey Traders,

In case you didn’t see it yesterday …

The Option Pit VIX Light turned red, and ProShares Ultra VIX Short Term Futures ETF (Ticker: UVXY) has options!

As I stated yesterday, this is a recipe for huge dollars in a short period of time.

I executed two trades on UVXY yesterday …

I am closing them today …

But the good news is that there are more trades out there.

Here is how I am going to make money in the days ahead …

I know I have been talking about UVXY a lot lately.

There is a reason … 

This product loses money …

A lot of money

Take a look at this chart:

This is a one year chart of UVXY, adjusted for the reverse split we just had.

This ETF started the year at $339.50…

… It’s now $34.75.

That's a 90% loss in a year!

The reason is two-fold…

The first is the same problem iPath Series B S&P 500 Short-Term Futures ENT (Ticker: VXX) has …

VIX contango (where the VIX futures prices are higher than the VIX cash price).

Everyday that a futures portfolio converges toward VIX, VXX and UVXY lose money …

When the VIX futures are in the shape above, VXX and UVXY are statistically extremely likely to be down.

The second issue is the leveraging.

The daily decay in VXX is about $0.24 …

Because UVXY is levered (meaning for every 1% VXX moves, UVXY moves 1.5%) that daily decay goes to $0.36 a DAY.

That means in a week, UVXY is going to be down $1.80, even if the VIX stays put!

Now, here is where the Option Pit VIX Light comes in …

If the VIX drops, that ALSO makes UVXY and VXX go down.

This is how I am able to buy a UVXY put on Thursday, and sell it on a Friday for a greater than 60% gain …

And this is why I want you to be at my event on Tuesday.

UVXY is handing me some pretty incredible opportunities right now, and I really would like to make sure everyone here is able to take advantage.

So on Tuesday, I’m giving a live presentation to my Volatility Edge members where I’ll be revealing THREE UVXY trades.

You won’t want to miss it. But you must be a member to attend, so sign up here if you want in.

Your Only Option,

Mark Sebastian

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