How Does UVXY Work?

Updated: Mar 10th, 2017 | Vance Harwood | @6_Figure_Invest

Exchange Trade Fund UVXY and its Exchange Traded Note cousin TVIX are 2X leveraged funds that track short-term volatility.  To have a good understanding of UVXY (full name:  Ultra VIX Short-Term Futures ETF) you need to know how it trades, how its value is established, what it tracks, and how ProShares makes money running it.


How does UVXY trade? 

  • UVXY trades like a stock. It can be bought, sold, or sold short anytime the market is open, including pre-market and after-market time periods.  With an average daily volume of 47 million shares its liquidity is excellent and bid/ask spreads are a penny.
  • It has an active set of options available, with seven weeks’ worth of Weeklys and close to the money strikes every 0.5 points.
  • Like a stock, UVXY’s shares can be split or reverse split. If fact, UVXY reverse split 5 times in its first four years of existence—which may be a record.  The last reverse split was a 5:1 and I’m predicting the next one will be a 5:1 ratio also.  See this post for more details on historical and predicted reverse stock splits.
  • UVXY can be traded in most IRAs / Roth IRAs, although your broker will likely require you to electronically sign a waiver that documents the various risks with this security. Shorting of any security is not allowed in an IRA.


How is UVXY’s value established?

  • Unlike stocks, owning UVXY does not give you a share of a corporation.  There are no sales, no quarterly reports, no profit/loss, no PE ratio, and no prospect of ever getting dividends.  Forget about doing fundamental style analysis on UVXY. While you’re at it forget about technical style analysis too, the price of UVXY is not driven by supply and demand—it’s a small tail on the medium sized VIX futures dog, which itself is dominated by SPX options (notional value > $100 billion).
  • According to its prospectus the value of UVXY is closely tied to twice the daily return of the S&P VIX Short-Term Futurestm  This index manages a hypothetical portfolio of the two nearest to expiration VIX futures contracts.  Every day the index specifies a new mix of VIX futures in that portfolio.  For more information on how the index itself works see this post or the UVXY prospectus.
  • The index is maintained by S&P Dow Jones Indices. The theoretical value of UVXY if it were perfectly tracking 2X the daily returns of the short-term index is published every 15 seconds as the “intraday indicative” (IV) value.  Yahoo Finance publishes this quote using the ^UVXY-IV ticker.
  • Wholesalers called “Authorized Participants” (APs) will at times intervene in the market if the trading value of UVXY diverges too much from the IV value.  If UVXY is trading enough below the IV value they start buying large blocks of UVXY—which tends to drive the price up, and if it’s trading above they will short UVXY.  The APs have an agreement with ProShares that allows them to do these restorative maneuvers at a profit, so they are highly motivated to keep UVXY’s tracking in good shape.


What does UVXY track?

  • Ideally, UVXY would exactly track the CBOE’s VIX® index—the market’s de facto volatility indicator.  However, since there are no investments available that directly track the VIX ProShares chose to track the next best choice: VIX futures.
  • VIX Futures are not as volatile as the VIX itself; solutions (e.g., like VXX) that hold unleveraged positions in VIX futures only move about 45% as much as the VIX. This shortfall leaves volatility junkies clamoring for more—hence the 2X leveraged UVXY and TVIX.
  • ProShares achieves the 2X daily return 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.  By doubling up the number of contracts they own they can double the returns.  To keep this leverage near a constant 2X they have to adjust the number of futures contracts held by the fund at the end of every trading day.  This adjustment is essentially a compounding process.
  • If you want to understand how 2X leveraged funds work in detail you should read this post, but most importantly you should know that the 2X leverage only applies to daily percentage returns, not longer term returns. For a leveraged fund longer term results depend on the volatility of the market and general trends.  In UVXY’s case these factors usually (but not always) conspire to dramatically drag down its price when held for more than a few days.
  • The leverage process isn’t the only drag on UVXY’s price. The VIX futures used as the underlying carry their own set of problems. The worst being horrific value decay over time.  Most days both sets of VIX futures that UVXY tracks drift lower relative to the VIX—dragging down UVXY’s underling non-leveraged index.   This drag is called roll or contango loss.
  • The combination of losses due to the 2X structure and contango losses add up to typical UVXY losses of 10% per month (70% per year). This is not a buy and hold investment.
  • On the other hand, UVXY does a good job of matching the short term percentage moves of the VIX. The chart below shows historical correlations with the linear best-fit approximation showing UVXY’s moves to be about 92% of the VIX’s.    The data from before UVXY’s inception on October 3, 2011 comes from my simulation of UVXY based on the underlying VIX futures.



  • Most people buy UVXY as a contrarian investment, expecting it to go up when the equities market goes down.  It does a respectable job of this with UVXY’s percentage moves averaging -5.96 times the S&P 500’s percentage move. However, 16% of the time UVXY has moved in the same direction as the S&P 500.  So please don’t say that UVXY is broken when it doesn’t happen to move the way you expect.
  • The distribution of UVXY % moves relative to the S&P 500 is shown below:


  • With erratic S&P 500 tracking and heavy price erosion over time, owning UVXY is usually a poor investment. Unless your timing is especially good you will lose money.


How does ProShares make money on UVXY?

  • As an Exchange Trade Fund (ETF) UVXY must explicitly hold the appropriate securities or swaps matching the index it tracks. ProShares does a very nice job of providing visibility into those positions.  The “Daily Holdings” tab of their website shows how many VIX futures contracts are being held.  Because of the 2X nature of the fund, the face value of the VIX futures contracts will be very close to twice the net “Other asset / cash” value of the fund.


  • ProShares collects a daily investor fee on UVXY’s assets—on an annualized basis it’s 0.95% per year.  With current assets of $700 million this fee generates around $6 million per year.  That should enough to cover ProShares UVXY costs and be profitable, however, I suspect the ProShares’ business model includes revenue from more than just the investor fee.
  • One clue on the ProShares’ business model might be contained in this sentence from UVXY’s prospectus:
    “A portion of each VIX Fund’s assets may be held in cash and/or U.S. Treasury securities, agency securities, or other high credit quality short-term fixed-income or similar securities (such as shares of money market funds and collateralized repurchase agreements).”  Agency securities are things like Fannie Mae bonds.  The collateralized repurchase agreements category strikes me as a place where ProShares might be getting significantly better than money market rates.  With UVXY currently able to invest around $350 million this could be a significant income stream.
  • According to’s ETF Fund Flows tool, UVXY’s net inflows have been around $1.8 billion since its inception in 2011.  It’s currently worth $700 million, so ProShares has facilitated the destruction of about a billion dollars of customer’s money—so far.  I’m confident the overall destruction trend will continue.
  • UVXY has escaped the negative publicity that Barclays’ VXX and VelocityShares’ TVIX funds have generated, but as it continues to grow in size and continues to destroy shareholder value at eye-watering rates it’s probably a matter of time before UVXY starts getting vilified on its own merits or lack thereof.


UVXY is like a loaded gun, effective when used at the right time, but dangerous if you leave it lying around.

UVXY chart

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Friday, March 10th, 2017 | Vance Harwood
  • Gregory Cheok

    Hello Vance,
    what do you think about holding a short position in UVXY if you are able to find the shares to do so?

  • Hi Gregory, Danger, Danger. Honestly review how you’d feel if UVXY went up to $80. Not at all unreasonable if market goes into a correction. Small position size (keep margin for 6X+ rise) and stomach of steel required.

    — Vance

  • Mark Miller

    Perhaps this is a dumb question but I am not knowledgeable about this. Is UVXY a buy and hold candidate or must it be traded to receive a benefit?

  • Hi Mark, Definitely not buy & hold. Tends to lose 4% to 7% of its value per month.

  • ben

    hypothetically, lets say I could see the future and knew that over the next year or 2 we’d see an ’08 like crash in the markets, if not, worse. would UVXY be a good buy or is there a better option. I know it seems like a ridiculous question and ive read some of your posts about UVXY being bad in the long run. but would it work in this hypothetical scenario? if im looking to “win the lottery”. is there another option that could provide me with that level of return without the steady decrease in value?

  • My backtests show that UVXY would have climbed about 8X in the 2008 crash. UVXY typically declines around 10% per month ( If you invest now and the 2008 event happens two years from now you about break even. If it happens a year from now you might double your money. In my opinion XVZ would be a better choice, it would have increased about 2.5X in the 2008 crash, but it does not suffer as much from decay. Beware, it still decays plenty.


  • Dave_CO

    Brandon, did you hold through June 24th/27th???

  • Just Sayin’

    I theory, if one worried the market would drop in a couple months along with an increase in VIX, would it be a better idea to by UVXY calls as opposed to buying UVXY shares? I know the calls would suffer from time decay, but seeing as UVXY isn’t a good buy and hold, are the options a better hedge on long bets?

  • The markets are pretty good at making these two approaches financially equivalent. Options have a built in kill switch when they expire, so emotionally they are generally easier to deal with than shares if you’re wrong. The counter example being UVXY spiking right after they expire.

  • Taha Jaffer

    Hi Vance, I purchased uvxy on June 29 @ $10 (250 units), felt that the brexit sell off might resume, however its a approx $7 today, looking to average just if there is a short term spike in the VIX so i can break even. Looking to pickup 200 units at $7. Or should i cut my losses which im down 30% 🙁

  • Hi Taha,
    It’s always tough to take your losses because there’s always the fear that the market will reverse right after you sell. However holding onto (or adding to) a UVXY position for more than a couple of days is always a risky decision if the market is rallying.

    Getting back to even is one of the worst goals in investing. It’s much better to ask the question of whether your position / planned positions are more or less likely to be profitable moving forward in the time frame you have in mind. Look for situations where you think the odds are in your favor.


  • John Allen

    Mr. Harwood.. Now that i’ve purchased 6k shares yesterday without reading this article. How long would you say i give them to see if I can make a piece of change in a quick downturn. I have a stomach of steel and can accept the fact i’m an idiot without beating myself up when things go wrong… 🙂

  • Hi John,
    My suggestion would be to decide now how much of a loss you are willing to take before you exit. You should plan on decay of at least 10% per month if your hoped for downturn does not materialize. Relatively minor corrections (e.g, 5 to 10%) tend to pump VUXY up by a factor of 1.5x to 3x, big corrections by a factor of 3x to 4.5x, financial crisis (2008-2009) factor of 12X. If you hold on for a year and a half with no downturns even another financial crisis will only get you back to break even.

  • John Allen

    Thank you very much.. I will do as much reading on all these positions as I can before making another move. I’m gonna hold my position for a few weeks to see how it shakes out but If i can get a quick bump I may exit.

  • retail manager

    Hello Mr. Harwood, just like some other posts let me wish I had seen this article beforehand. I started buying few days after Brexit for $10.49 and every few days afterwards as well to average out when UVXY would go down more than 7-8%. Now I have over 9,000 shares and average cost is$8.14 (25% down as per friday closing). Would it be a good strategy, 1. to hold for say 6 months and hope for turn around; 2. Put more and bring the average down to say $7.50 and wait; 3. cut my loses and move on?
    I understand Stock market at its highest may call for some kind of correction sooner or later and hence at least break me even in future. I don’t mind waiting even more if needed. While I understand I can’t hold you for it but what would be your suggestion? Appreciate that.

  • Typically UVXY goes down around 10% per month if there is not a volatility spike, that would leave you down another 50% from where you are now. I suggest you figure out the maximum losses you are willing to take–because if you stay long you stand a very good chance of losing all your investment. Of course if a volatility spike occurs soon you might recover and make some money–but what are the chances? Volatility spikes are notoriously hard to predict. One strategy is to sell some now, and then wait a bit before selling on the rest. That way there is some positive news either way–either you didn’t take as much loss as you would have, or at least you had some position if UVYX goes back up.

  • Spaniard Oo Oo

    Then it is a good candidate for short, steady income. Only thing need to look for is the spike. Or, you dont recommend shorting it.

    Below is my day trading idea. ( not yet used). What do you think about it?

    “If market is green and no bad news for the morning, and not expecting any report”, then TVIX /UVXY is expected to go down” – So, in that condition shorting is a good idea.If market is red, and expecting few reports, then buy them”

    Another question is Does the Shorting TVIX is same as long in XIV”?

    Volatility in Oil, Gas, Gold will affect VIX as well?

  • rttrader12

    Hi Vance – I was doing some basic math on historical NAV for UVXY and was very surprised when I realized this: The NAVs per share on 10/3/2011 and 10/4/2011 were 2,016,650 and 2,400,000 respectively. I checked a few times to confirm these were ‘per share’ values. I don’t know if you have an opinion on this, but what was proshares thinking!?! What kind of a retail investor (or institutional) would want to buy shares at that price? Why would proshares price it this way, and preclude themselves from a majority of the prospective market?

  • Hi rttrader12, UVXY’s inception was a lot of reverse splits ago. It’s inception price was $40 per share. The NAV you came up for was the adjusted price that accounts for all the reverse split multiplers and applies it to the inception price. Another way to look at it is if Proshares had not reverse split UVXY it would now be trading at $ 0.0000167 per share.

  • rttrader12

    Understood. Very simple answer. Thank you.

  • Jim Hintz

    This is a great article to explain UVXY pitfalls- I used to buy and hold and watch it drift down. This year, I waited for a run up in the market, than bought it about 2 days before brexit. Made a buck a share and got out. I will also buy it when the market has had a great run but I expect a pullback. Just yesterday I bought in when it was at 19.65- (dow up 80 ish- then the market turned and went down in the afternoon. I had an auto sell set up at 22. It hit that briefly and I made $2.35 per share in about a 3 hour period. But if you do this, put in sell orders for the gain or loss you will accept, ( I had to because I was at work). Later in the day it went back to 21 pretty quickly- she moves like a butterfly and stings like a bee. If you carefully trade it, you can make some good fast gains. But if you hold it watch out.

  • Jim Hintz

    This is a great article to explain UVXY pitfalls- I used to buy and hold and watch it drift down. This year, I waited for a run up in the market, than bought it about 2 days before brexit. Made a buck a share and got out. I will also buy it when the market has had a great run but I expect a pullback. Just yesterday I bought in when it was at 19.65- (dow up 80 ish- then the market turned and went down in the afternoon. I had an auto sell set up at 22. It hit that briefly and I made $2.35 per share in about a 3 hour period. But if you do this, put in sell orders for the gain or loss you will accept, ( I had to because I was at work). Later in the day it went back to 21 pretty quickly- she moves like a butterfly and stings like a bee. If you carefully trade it, you can make some good fast gains. But if you hold it watch out.

    Friday UVXY opened at $20.35- fell to $19.25 before noon- rose to $22.21 by 2pm- closed at $20.83. That’s a serious swing. – you have robe nimble! Trading at the wrong time would have lost a buck a share- buying at the low and selling at the high got you $3 per share- holding netted you 50 cents per share, which you’ll probably lose on Monday.

  • Joch C.

    I read these post and people speak of purchasing UVXY for $10, $14 etc. Yet when I look at the UVXY chart, I never see a price lower than $16.80, which occurred September 7th, 2016. Are we talking about different products, what am I missing? I understand there have been 5 reverse splits that supposedly kept value the same, yet increased the unit price, do the charts show this? Somebody who only checks 10 day charts for bottoms, could be severely mislead, no?

  • Hi Joch, The charts are reverse split adjusted, so they don’t reflect the past values that the ETP actually traded at. You’re right, people that only look at short time frames can draw the wrong conclusions. With UVXY they will rapidly learn their lesson.

  • Joch C.

    So let me see if I get this UVXY. 1.The chart can’t be used to predict future performance because it has been adjusted at least 5 times. 2. More likely than not, UVXY always goes to zero. 3.The many reverse splits are the only reason this is not now sitting zero.

  • Correct on all 3. For #1 your context is a short term chart, a longer term chart would show UVXY as a perennial loser.

  • Steve Gosen

    I am just getting into trading aND many have said to start with UVXY. But I have no idea what the company is, and I’ve been reading about it for over a hr now lol Can anyone explain what it sells or how it works for someone like myself ? Thanks much

  • Hi Steve, UVXY is not a company. They don’t make anything. People have lost a TON of money on it over the years. It’s an Exchange Traded Product that is a 2X leveaged tracker of VIX futures. In my opinion this is not a good place for anyone to start trading.

  • Steve Gosen

    Thanks for the info. What are some good company for a beginner to start trading with in Canada ? Thanks for the reply Vance.

  • Adam Webb

    UVXY – Day trading success means moving your money back to cash each day. I made silly money last Christmas, went long, average down and ended up loosing 75% of my life savings during the last split. There is money to be made if you move to cash at the end of the trading day. I’ve made $2+ a share holding overnight before, but I’ve lost more. There is another name for holding UVXY overnight, it’s called gambling. SVXY is
    a great option to always be in the money. When UVXY goes down SVXY goes up. Even after loosing so much, now I know what I’m doing it’s a happy trade. Oh, and it beats working for a living! 🙂

  • rttrader12

    Hi Vance – Hope you are doing well. I have a general question about options calendar but will ask in the context of UVXY since it is more relevant that way. How exactly do I figure out when options for a particular expiration will become available to trade in the market? For example, as of 9/16/2016, UVXY has a Mar 2017 expiration contract but I’m interested in the Apr 2017 or May 2017 contracts. How do I find out when these options contracts will be ‘live’? Is such a calendar published on the CBOE website? I tried looking at a few places but had no luck. Thank you.

  • Hi rttrader, It looks like these two resources might be helpful:


  • Danny Pisarcik

    Hi Vance,
    I think I understand the structure of these 2-3x leveraged funds, like UVXY, VXX, etc., that have built in contango effects that ultimately drive the value of the asset towards 0. So, why couldn’t I just go out say 1 to 2 years and buy a deep in the money put with very little premium and check my account a year or two from now and capture all the downside these assets have? if a split occurs, it should be accounted for on my options. To me, it seems like there is no way to lose over a long period of time. Am I missing something?

  • Richard Blocker

    Hi Vance or anyone that can enlighten me. My thoughts are we will get a 5-10% correction by 27th. I bought some SEP 30 19.50 calls on the 21st and averaged down with some more on the 22nd. Current position is down 64.12%. My question is where can we find a simulator for the price of UVXY if the S&P moves a certain percentage. Is there a simulator out there? I also was prepared to lose around 50% of my investment but it moved so quickly with the S&P not having a huge up move over the last few days and only a small fraction down today. Just trying to figure out how it will move given certain daily moves in the S&P and when is a good time to exit or reenter. Thanks again.

  • Hi Richard, There are a lot of moving parts between the S&P and the price of UVXY. Historically the average VIX % move is about -4.7X of the SPX, but there is a wide distribution . On average the VIX futures that comprise UVXY move about .45 of the VIX move, but again there is a wide distribution. Since UVXY is 2X leverages that gives an average .90 % move. If VIX futures are in contango that drags UVXY down around 20% per month Finally the volatility of volatility impacts UVXY, dragging it down significantly if volatility is bouncing up and down.

    Overall, I don’t see how this will help you with timing. You either are right calling the correction or you will likely have a total loss.

  • Hi Danny, This is a trade a lot of people like. The premium you pay for these puts is pretty high, so the price of the fund has to go significantly below the strike price before you even break even–and your profit is limited because the fund price can’t go below zero. Even with all that I think people have been profitable with this strategy. The main risk is a bear market. They aren’t short term situations and these funds will get a tremendous boost when that happens (and it will at some point). In that case these puts will likely expire worthless.

  • dan jensen

    Hi Vance,

    I am looking at the 2 year chart of UVXY – is it true that it traded about 200 back in September 2015 period, came back down for a few months and then traded/spiked close to 300 in January-February 2016 when the market correction of about 10% took place. And since it traded almost 300 in Jan/Feb 2016, it has now come down to about 18? Or is the chart skewed because of the reverse splits? It couldn’t be contango that would have caused the drop from almost 300 in January-Feb 2016 to about 18 as of 9/30/16? And if this is all true, could it be expected that if the market corrects again 10-15%, there would be another potential spike from these current levels to ____ ? Feel free to fill in your guestimmate….

    Please enlighten me as to how this huge trading range from 300 to 18 took place…. Thanks for your expertise – loved reading all of your responses to the posters …. Dan

  • Hi Dan, The charts are reverse split adjusted. UVXY never traded at those levels. This chart shows VXX with the upper line being reverse split adjusted and the lower one showing the actual traded values over time. UVXY’s chart would look similar – only worse…

    Yes, contango caused all this damage. A 95% drop in less than a year is on the high side, but pretty much typical. Hence all the reverse splits (see and )

    A general market correction in the 10 to 15% range would probably cause UVXY to go up around 3 to 4 times its value right before the spike. Impressive, but only if your timing is great–otherwise contango eats your lunch.


  • John Jaber

    Vance Thanks for the great Article I found things to good to be true I have been shorting The UVXY every day for the past month and I have been making a great return There is an average 7% rate for shorting the stock but it’s nothing compared with the contango loss on this stock,I have called 2 friends and advise them to do the same but there Brooker inform them there is no available stock to short on this security Imeasures I’m doing something wrong here or just lucky, what’s the downside of selling short and holding long term since the contango loss is huge I would like your advice .
    Thank you

  • dan jensen

    Hi Vance,

    As I am a newcomer to UVXY and it’s workings, what is the downside after a spike occurs, with perhaps UVXY spiking 3-4 times its current level to about 50-60, and then buying long term puts or even a straight purchase of SVXY and waiting for the etf to come back down to its long term average and also let contango do the heavy lifting for you ?

    Thanks again for your expertise….Dan

  • Hi Dan,
    The challenge to what you propose is knowing when the volatility spike is over. If you’re wrong and the VIX spikes again it can be painful. Not too much pain with the puts, but pretty bad with a SVXY position.

    — Vance

  • Hi John, Shorting UVXY is a crowded trade. Sometimes you can find shares to short by calling other brokers. Be carefully, especially with your position sizes, UVXY can reverse with a vengeance. Please read:

  • Brij

    THis is not a sixfigure investing idea…..UVXY is crap

  • Robert Martin

    Hi Guys , sorry for my english .. I was contemplating ( december 23 butterfly spread) , $1.5 out of the money both way’s) shorting 9 puts and covering with 8.5 and shorting 12 call’s and covering 12.5. When I notice that the call’s ( $1.5 out of the money) are exacly 2x more expensive then the put’s ! What im I not seing here ?? Robert

  • Hi Robert, The cause for this is a variant of what’s called the “volatility smile”. The standard Black & Scholes option pricing model assumes that every option strike price should consider the volatility of the underlying security is the same for all strikes. This assumed volatility shows up as the implied volatility on options chains, or “IV”. It turns out this Black & Scholes assumption is bad because as people found out in the 1987 crash stocks can drop a lot faster than they go up. For normal long equities, e.g., SPY, this smile shows up as higher IVs for options as you go lower in strikes. Since UVXY goes up when the market goes down its IV goes up with higher strike prices. For your trade the $12 calls have an IV of 115 and your $9 calls have an IV of 90. Higher IVs get reflected in higher premiums.


  • Guy Nigel Burgess

    I get a very strong sense you’re horribly jaded. Did the author lose a small fortune of some1 else’s $$$ playing the VIX? If I wanted this much negativity…………..

  • Nope, didn’t lose $$$ playing my or someone else’s money on this. Have had been contacted over the years by multiple people that have lost hundreds of thousands. I do believe there are people that consistently make make money on this, but I think they have well above average sophistication and/or timing sense.

  • Brijesh

    In this aricle you said you are confident the overall destruction trend will continue. why this kind of product still allow to trade and open loot for customer’s / small investors ?

  • The documentation on these products is very clear, there is no deception on their likely behavior. They also have legitimate uses–in a volatility spike they are an impressive way to profit / hedge your other investments. Most brokers require investors to sign off extra waivers if they want to use these products.

    We allow people to buy knives even though they can hurt themselves with them–what level of control to you want to assert on people? With freedom comes responsibility.

  • GammaDog

    I’m confused. I believed UVXY tracked the ^VIX less cantango loss. I bought a small amount of UVXY on Friday 2/10 at 21.90 when the ^VIX was at about 10.80. As of now (Monday 2/13 just before noon) the ^VIX is up 4% at 11.28 while my UVXY is down 4% at 21.00.

    Far from tracking the short term ^VIX, this performance is its perfect inverse. Is this an anomaly, or did I misunderstand the intent of the UVXY? I couldn’t find a single data point in the scatter plot in the article that had an 8 point spread around the axis.

    I had only intended this as an experiment in buying what I think of as “very short term volatility insurance”. I got the volatility guess right… but my insurance broker seems to have taken my premium payment and denied my claim.