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UVXY: Make Volatility Great Again

ZMK Capital profile picture
ZMK Capital


  • Ultra VIX Short-Term Futures ETF is a 1.5x leveraged fund that tracks short-term market volatility.
  • Primed to closely replicate the daily return of the S&P VIX short-term futures contract, UVXY provides a toolbox for tactical volatility plays.
  • Part of the leveraged ETF family, this product by nature mechanically depletes over time.
  • Not a long-term hold – but rather a go-to in times of heightened volatility, multiple strategies exist to use UVXY to capitalize on times of renewed fear.
  • But with volatility suppressed, we see if explosive profits can still be reaped by tracking this derivative-based Molotov cocktail.

This article was amended on 5/6/2021 to reflect a correction in the hypothetical scenario calculations.

Volatility Ahead
Photo by DNY59/iStock via Getty Images

Brief Overview

Equity markets Vintage 2021 must be one of the strangest thus far. If the investment banking equivalent of

This article was written by

ZMK Capital profile picture
ZMK Capital is a Southeast Asian based prop trading desk focusing on long/ short macro set ups globally. Additionally, the desk publishes equity specific research, ETF overviews, earnings plays and macro-economic analysis. Current focal points include the global energy market, natural resources, macro-economics, interest rates and Fx. Beyond managing money in these markets, interests include data science linked to securities markets, game theory & professional sports.Feel free to direct message ZMK if you are interested in being part of a community of prop traders, investors & money managers.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (21)

johnx4x profile picture
I'm playing this right now. Is it a gamble . Yes. But a gamble on something going haywire.

Meanwhile those shorting the vix think it just goes one direction. They seem to think change of direction cannot occur.

If I am wrong.. I close my position.
SANCH3Z profile picture
@johnx4x the key is to play both sides.
Reverse splits are often considered a losers game with Equities.
The same with The VXX.
The Sh__ will hit The Fan at some point but not until The Dems stop giving out Money to The Non Rich.
blucrab profile picture
really - wait for the b-b0mb
Interesting I like the article
Reverse split 1 for 10 May 26th.
A pity it will RS in a few days, it is so fun to trade it around these levels... (selling 1 option at 10x already makes it too big for lots of people)
blucrab profile picture
$5 call option looking very good!
StandSuave profile picture
When the VIX spikes I usually look to open a position on SVXY to profit on volatility's return back to normal. A bear call spread on UVXY is a tempting alternative though. Good article.
Yantalameo profile picture
When will the split off?
@Yantalameo the 26th I think...
@Yantalameo and @qwerty11 I got this from GREQVI (which was very nice thing to do):

Doug Smiley profile picture
I've been fascinated with UVXY for years. The Fed's free money will not last forever and the transition to a carbon free society could bring back volatility. I'll always keep UVXY in my portfolio.
@Doug Smiley If you don't mind answering, how do you keep UVXY in your portfolio? If you are holding stock, it has been hitting all-time lows several times in the last few weeks.

I do own some stock but I try to mitigate the downward trend by selling ITM CALLs (covered CALLs) and at the same time buying OTM CALLs as a hedge against a market melt down. It is a net credit trade but still losing money since the stock keeps hitting all-time lows. I wouldn't be surprised if we hit another low today.
Mrnomad profile picture
@Marod After a selloff on S&P100 tickers, I use the same strategy u do which is straddle the ATM with 30 day calls and toss in some calls that r below ATM. Excel becomes very useful herein because it tells me what my % of gain is if shares are surrendered (ticker up) or not surrendered (ticker down). If ticker down, I made sure my chosen ticker generates DIV so while I hibernate and wait for the eventual rise, at least I am making Starbucks $$. Connecting Excel to Thinkorswim, it's easy to observe. Hope that helps.
@Mrnomad Thank you! I did not know you could get quotes into Excel via TOS. I saw the Youtube video and it is neat. I am currently using Google sheets and the "=GOOGLEFINANCE(SPY)" to get stock prices for my worksheet that I use to track trades and profit.

I will probably look at doing my 'insurance' your way once I start losing my UVXY stock. My covered CALLs are in the money when I place them about a month out but lately the stock price is dropping so hard it is OTM when the CALL expires!
Thanks. Doing a short bear CALL spread sounds like a way to lock in a profit. I will look at it a bit more. Right now I was doing short PUTs and then the VIX dropped below 20 and now I have a lot of PUTs to roll to prevent an acute loss. ;-)
atreat profile picture
Came here for the catchy tile (LOL). I have been in and out of UVXY and VXX many times, great article for those interested in understanding UVXY, but I think the math is not entirely correct; If the index drops 25%, (to $75), the 1.5x leveraged ETF will lose 50% of its value (to $50). Wouldn't 1.5 x be closer to 37.5% or a lower value near $62.50 ... my 2 cents ;)
ZMK Capital profile picture
@atreat Oooopsie daisie - you are so correct. I knew I missed something. Let me correct along with a few wording errors. Thank you for your feedback.
thanks J been dabbling in this, every so often. Learning more and more. Hey would you be willing to explain and compare the differences between the other volatility funds like VIXY and others?
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