UVXY is one of the instruments that Jim Cramer said was responsible for the 1000 downturn of the Stock markets from 2/2/18 to 2/8/18. The UVXY has become one of our favorite instruments to trade. As a word of warning this is VOLATILE.
What is the UVXY?
- UVXY is an ETF (Exchange Traded Fund) that trades like a stock.
- UVXY has a set of options
- UVXY can be split or reverse split
- UVXY can be traded in an IRA
- The value of UVXY is closely tied to twice the daily return of the S&P VIX (Volatility Index) Short-Term Futures. The key is that it is 2x the daily return.
- The 2X daily return is achieved by taking advantage of the fact that VIX futures only require a small percentage (e.g. typically less than 25%) of their face value be deposited as margin to purchase the contract. Doubling up the number of contracts can double the returns, and also double up the losses.
How are trading this?
We have lost a small amount of money day trading this. However, we have been making money swing trading this. The rough pattern to UVXY is that it is inverse to the Dow. When the Dow rockets UVXY plummets. We have been using the UVXY as a way to short the market. We have been entering into trades after big run ups when we think the momentum to the upside is waning. Thus, we hold it overnight and watch the action on the next day. We have tight stop losses, and are taking profits at double the stop loss. Thus, if we are wrong two times, we only have to be right one time to make it up. Since the dollar value to the UVXY is low the risk is fairly low here as long as you do not buy and hold.
We are trading this on Robinhood because of the free commissions which makes swing trading simple and easy. If you are going to day trade please be aware that Robinhood will lock your account if you are marked as a pattern day trader. (4 day trades in a 5 day trading period)
Click here for a review on Robinhood
If you are going to set up an account and would like to help us out please click here to sign up. We get a free stock when you sign up and get your free stock.
(We are not professional traders this is just our opinion, and a record of what we are doing. The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.)