SVXY try to maintain 30 day( ~22 working days) short exposure on the VX futures. The above sheet explains the workings of the roll process.

To start with ( ROW 4 ), if the fund wants to have $100,000 short exposure on VX curve for the next 30days at the end of the first day of M1 future becoming near future to expiry, and, lets say, M1 future ( near month future ) is trading at $16, and M2 ( next to near month future ) is trading at 17, the fund shorts

**((22-1)/22)*100000/16** **M1 contracts** ( ~__ 5965__ (Cell F4) ), where

22 is days of the expiry of M1 contract,

1 is the day where we go short,

100,000 is the total exposure we fund wants,

16 is the price of the M1 contract at the end of the first day of the M1 contract become the nearest month contract to expiry

**((1)/22)*100000/17 M2 contracts** ( ~__ 267__ (Cell G4) ), where

22 is days of the expiry of M1 contract,

1 is the day where we go short,

100,000 is the total exposure we fund wants,

17 is the price of the M2 contract at the end of the first day of the M1 contract become the nearest month contract to expiry.

At end of day 2 ( ROW 5 ), total acct value of the fund is 103,116.64 ( formula = ( (1+D5)*H4*B4 ) + ( (1+E5)*I4*C4 ) ). We notice fund acct value increased because, both the M1 and M2 have fallen a little bit ( as fund short them, it gains in value ).

Now, the fund has to rebalance $103,116.64 across M1 and M2 to maintain 30-day( ~22days) weigheted short exposure. Hence, fund tries to have,

**((22-2)/22)*103,116.64/15.5 M1 contracts** ( ~__ 6047__ (Cell F5) ), where

22 is days of the expiry of M1 contract,

2 is the day where we go short,

103,116.64 is the total exposure we fund wants,

15.5 is the price of the M1 contract at the end of the second day of the M1 contract become the nearest month contract to expiry

**((2)/22)*103,116.64/16.5 M2 contracts** ( ~__ 568__ (Cell G5) ), where

22 is days of the expiry of M1 contract,

2 is the day where we go short,

103,116.64 is the total exposure we fund wants,

16.5 is the price of the M2 contract at the end of the seond day of the M1 contract become the nearest month contract to expiry.

And, it goes on as above until M1 is expired( by then, SVXY will have most short exposure on M2 ) and M2 becomes M1, M3 becomes M2.

As you have seen in the above sheet, even though both M1 and M2 comes back again to the original value at M1 expiry, the fund has lost nearly 20%.

You can re-create the sheet using the formula on ROW 1. The formula provided on ROW 1 is for the ROW 5, and you can extend the formula for other rows.

**Disclosure:** I am/we are long SVXY, UVXY.