• support@madhedgefundtrader.com
  • Member Login
Mad Hedge Fund Trader
  • Home
  • About
  • Store
  • Luncheons
  • Testimonials
  • Contact Us
  • Click to open the search input field Click to open the search input field Search
  • Menu Menu

Follow Up to Trade Alert - (UVXY) SPLIT NOTIFICATION - May 20, 2015

Trade Alert

As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. This is your chance to ?look over? John Thomas? shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen.

Alert

Trade Alert - (UVXY)- UPDATE-SPLIT NOTIFICATION

Buy the ProShares Ultra VIX Short-Term Futures ETF (UVXY) at $9.37 or best

UPDATE

5-20-2015

Portfolio weighting: 10%

Number of Shares = 1,066 shares

 

The ProShares Ultra Vix Short-Term Futures ETF (UVXY) underwent a 5:1 reverse split today.

This is to prevent the share price from going to zero, where the mathematics of this fund will eventually take it.

It is hard to enter in an order at zero, or some fractional cents.

If you are holding the (UVXY), the number of shares you own is divided by 5, while the market price is multiplied by five. There is no net change in the value of your position as a result of this reverse split.

The reason this fund can only fall over the long term is because of the contango that permanently haunts it. While the front month Volatility Index (VIX) is trading at $12.90 today, three-month volatility is at a lofty $15.50.

The (UVXY) buys three month volatility and runs it into expiration. It then multiplies this negative impact with 2X leverage. The guaranteed loss on this trade is therefore $2.60, or 16.8%. It is a perfect money destruction machine.

Do this every month, and eventually you use up all your capital. You see this most clearly on the long term split adjusted (UVXY) chart below, which has it going from $10,000 to $42.33 in only three years, a loss of 99.60%.

This is why you should only hold the position for a few days or weeks at the most, and even then to hedge long positions in other stock or indexes. You only want to own it during the brief, frenzied volatility spikes that occur, as we did with the last trade.

You might want to ask the question, ?Why aren?t we shorting this thing??

The (VIX) is prone to sudden, extreme moves to the upside whenever an unforeseen geopolitical or economic event takes place, such as a terrorist attack or a bad nonfarm payroll number.

It can double in days, as traditional long side investors rush to buy some downside protection. It has done this a few times in the past year. During the crash, the (VIX) ratcheted all the way up to $90.

Often you get large moves of 20% or more right at the opening, as professional traders, who are almost always short volatility, rush to cover short positions, all at the same time. As a result, many of the people why try this strategy often go bust.

On top of this, your broker is unlikely to extend the margin you need to put on a decent position, especially to beginners.

The concern is that when the customer wipes themself out, they will take a piece of the broker?s capital with it. Customers who lose money in this way often end up suing their broker, another turn off.

The people who do make money at this tend to be large teams of very experienced traders which massive computer and programming support executing complex risk control algorithms. It costs millions of dollars to put all this together.

Needless to say, you should not try this at home.

Here are the new numbers that should apply to your existing position, based on 10% of a $100,000 notional model trading portfolio:

long 213.2 (UVXY) shares at?????$46.85

new stop loss: $40

UVXY 5-20-15

VIX 5-20-15

Share this entry
  • Share on Facebook
  • Share on X
  • Share on WhatsApp
  • Share on Pinterest
  • Share on LinkedIn
  • Share by Mail
https://www.madhedgefundtrader.com/wp-content/uploads/2015/05/Reverse-Split.jpg 396 599 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2015-05-20 12:46:132015-05-20 12:46:13Follow Up to Trade Alert - (UVXY) SPLIT NOTIFICATION - May 20, 2015

tastytrade, Inc. (“tastytrade”) has entered into a Marketing Agreement with Mad Hedge Fund Trader (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade and/or any of its affiliated companies. Neither tastytrade nor any of its affiliated companies is responsible for the privacy practices of Marketing Agent or this website. tastytrade does not warrant the accuracy or content of the products or services offered by Marketing Agent or this website. Marketing Agent is independent and is not an affiliate of tastytrade. 

Legal Disclaimer

There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.

Copyright © 2025. Mad Hedge Fund Trader. All Rights Reserved. support@madhedgefundtrader.com
  • Privacy Policy
  • Disclaimer
  • FAQ
Link to: May 20, 2015 - MDT Pro Tips A.M. Link to: May 20, 2015 - MDT Pro Tips A.M. May 20, 2015 - MDT Pro Tips A.M. Link to: SOLD OUT - Monday, August 3, 2015 - Zurich, Switzerland Global Strategy Luncheon Link to: SOLD OUT - Monday, August 3, 2015 - Zurich, Switzerland Global Strategy Luncheon SOLD OUT - Monday, August 3, 2015 - Zurich, Switzerland Global Strategy Lun...
Scroll to top