SVXY: Volatility Got Crushed After The Election Results (Rating Downgrade)

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Binary Tree Analytics
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(7min)

Summary

  • ProShares Short VIX Short-Term Futures ETF benefits from falling volatility; post-election VIX normalization makes it less attractive, prompting a 'Sell' rating to take profit.
  • SVXY is not suitable for buy and hold due to potential significant drawdowns from sudden volatility spikes.
  • The fund should be bought when VIX spikes due to external events and sold after volatility subsides.
  • With the election behind us and VIX normalized, the easy gains in SVXY are over, making it a poor long-term investment.
Economic with stock exchange market showing stock chart down and in red negative territory. Business and financial money market crisis concept. Illustration.

TERADAT SANTIVIVUT

Thesis

It should be fairly well known by now that Donald Trump won the latest U.S. elections and he is set to become the next President of the United States. Irrespective of the winning candidate, financial markets were wary of any issues and

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Binary Tree Analytics profile picture
4.81K Followers
With an investment banking cash and derivatives trading background, Binary Tree Analytics ('BTA') aims to provide transparency and analytics in respect to capital markets instruments and trades. BTA focuses on CEFs, ETFs and Special Situations, and aims to deliver high annualized returns with a low volatility profile. We have been investing for over 20 years after obtaining a Finance major at a top university.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such 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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