large "put" (it actually took three of them) saved Wall St. today. Provided a nice rebound to cryptos which are currently trading the opposite direction of equities.
Guess who? Futures trending down again tonight. Wash, rinse, repeat tomorrow?
“Welcome to Fed Club. The first rule of Fed Club is: you do not talk about Fed Club. The second rule of Fed Club is: you DO NOT talk about Fed Club! Third rule of Fed Club: if someone yells “stop!”, goes limp, or taps out, the Fed is over.”
From 460 million to 18???? Well, i guess it didnt go to zero. Haha
you prevent "zero" with continuous splits. So if equities crash what is the upside. And will you see continuous reverse splitson the way back up? LOL
I think you are getting your split definitions backwards. UXVY has never had a forward split. It has had 10 negative splits. If one had bought 60M shares at fund inception and held until now, they would have exactly 1 share left today. UXVY will likely never have a forward split as that would require the VIX surpassing all-time highs and staying there. Besides, if the PPT can rescue the markets at will (eventually even buy the market indices instead of just bonds), you are hoping against hope with UVXY.
@derryb said:
my bad. i meant to say reverse splits. And if UVXY shoots to the moon, you don't think the custodian will provide relief to the price with splits?
No worries.
That is correct. There is virtually no chance ProShares would ever need to do this. Once again, due the decay rate of it being a 1.5x leveraged fund, and the unlikelihood that volatility surpasses any prior levels in history by an order of magnitude. If a "perfect" trader had bought UVXY on 17 Jan 2020, days before the crash started, and waited until the exact moment of peak VIX on 20 Mar 2020 to sell, he/she would have made 9x their investment. If there were a volatility repeat of that now, UVXY might reach $100 (recent low of $11 x 9). That is the reality of it. And, even if that rarified level of volatility (VIX 80+) returns, and UVXY reaches $100, it will be less than 1/10 of its value at the peak of the 2020 volatility spike. Very short term, with nearly perfect timing, one can make money in UVXY, but over any substantial length of time, it's pretty much a guaranteed loss.
the article discusses the lack of serious decay during a climbing market with 2 and 3X leveraged ETFs that profit on a climbing market. Can one assume that the same applies even more so during a declining market to an only 1.5X leveraged ETF such as UVXY that gains in price during an equities decline?
In other words am I correct in my belief that decay with UVXY during a market crash is negligible to overall UVXY performance as long as that volatility continues regardless of how long it lasts?
the article discusses the lack of serious decay during a climbing market with 2 and 3X leveraged ETFs that profit on a climbing market. Can one assume that the same applies even more so during a declining market to an only 1.5X leveraged ETF such as UVXY that gains during a declining market.
In other words does my belief that decay with UVXY during a market crash is negligible to overall UVXY performance?
That seems to be the case. Had you bought TQQQ in 2000 your basis (due to splits) would be 43 cents. It's high was $83.12 at the end of last year.
It is interesting that down days in the market don't always lead to up days with the VIX or UVXY
"As long as that volatility continues"... What do you mean by that? If the VIX were to rise and keep on rising, sure UVXY would continue upward. But VIX isn't like a stock index that tends to go up over time (due to population growth, productivity gains, inflation, etc.). Fear isn't a growth stock. It tends to oscillate, over time, around some average. TQQQ has benefitted from the fact tht the NASDAQ has been on a tear over the 13 year period since inception. Way more up days than down days, and the only two losing years in the index were barely negative. So the decay, which is still there, is obscured by the outsized compounded gain. If the NASDAQ today was trading around what it was in 2010, TQQQ would look pretty bad. Still, you cant't apply the growth idea to UVXY. https://www.google.com/amp/s/seekingalpha.com/amp/article/4397816-why-uvxy-is-bad-trade
@RobM said:
So the decay, which is still there, is obscured by the outsized compounded gain.
And UVXY with "outsized compounded gain" (and a lower 1.5X leverage) during a market crash's volatility is different?
I have always recognized "decay" with leveraged ETFs but I remain committed to my belief that UVXY decay over time is small compared to the gains during extreme volatility (sudden drops in equity prices).
Can someone put the above discussion in lay terms? I guess I have not kept up with the times. While I would like to understand what is being said, the fact I DO NOT may make it meaningless to me/others??????
@59Horsehide said:
Can someone put the above discussion in lay terms? I guess I have not kept up with the times. While I would like to understand what is being said, the fact I DO NOT may make it meaningless to me/others??????
ETFs Exchange Traded Funds, are similar to mutual funds but they trade, using their symbols, much more easily and just like stocks on the various stock exchanges. Like mutual funds they provide easy access to "baskets" of assets such as a group of mining companies or stock indexes. The additional leveraged ETFs offer 1.5, 2 or 3x the price movement of the underlying asset they represent and are more volatile (drastic price swings) than the underlying asset because of the "multiple" involved. There are even "Inverse" and Inverse leveraged ETFs that move in the opposite direction of the asset(s) it tracks. For example with an inverse gold ETF, its price would go up when the price of gold goes down with the amount being determined by its leverage multiple (1.5, 2 or 3X). Inverse ETFs provide opportunity to profit when the underlying asset is losing money. Leveraged ETFs are all derivatives (gambling) as they do not hold any of the assets that they track.
Leveraged ETFs lose value over time to "decay." Decay is the natural erosion of value over time unique to leveraged ETFs. The longer the leveraged ETF is held, the greater the decay. For this reasons it is advisable to not hold a leveraged ETF other than short term. UVXY tracks the VIX (stock market volatility index). The discussion is centered around my belief that explosive gains (as would be seen in UVXY in a stock market meltdown) far outweigh any UVXY loss of value because of its natural decay making concerns about decay irrelevant when holding UVXY leading up to and during a stock market crash.
@59Horsehide said:
Can someone put the above discussion in lay terms? I guess I have not kept up with the times. While I would like to understand what is being said, the fact I DO NOT may make it meaningless to me/others??????
https://www.investopedia.com/terms/l/leveraged-etf.asp
Apologies for my contribution to getting this thread off topic. The link provides a good tutorial. But these leveraged ETFs are very complex, so it is true that most people buying them do not fully understand them. I sure don't. The point I am trying to make is that the VIX volatility index (and thus the UVXY ETF) are fundamentally different than a leveraged long fund seeking to magnify the gains of a basket of stocks that historically trend positive. The VIX does not trend up or down for any significant time, it merely fluctuates to varying degrees above some average. So due to the inefficiencies (decay) in the daily readjustment in the funds futures/options contracts, the UVXY share value trends down over time. So if you were to hold UVXY for a year or two, and then the S&P 500 collapses by, 40, 50, even 60% (i.e, fear and capitulation), you will still lose money. Does that help?
@RobM said:
So if you were to hold UVXY for a year or two, and then the S&P 500 collapses by, 40, 50, even 60% (i.e, fear and capitulation), you will still lose money. Does that help?
and this is where we disagree. My belief is that UVXY gains from a 50% drop in stocks would far outweigh the decay expense of holding the UVXY for one year prior to the stock market 50% loss.
What we need is an accurate formula for this specific case. Got one? lol
Formula for VIX...
I don't think there is one for UVXY or what we are discussing. But here is what I propose (and it is scaled down from what I was initially thinking so as not to violate anything "taboos" as alluded to in the forum terms of service):
I will put up 1 ETH silver round in airtite capsule against 1 of your eagles. One year ago, UVXY was right around $100. Your premise is that an impending crashing market, and accompanying extreme volatility will overcome that decay, and then some. If UVXY closes at $100 or more (adjusted for any reverse splits) on any day within the next year (market close at 4pm EST 1/25/2023) I send you the shiny 1oz ETH round. But if UVXY fails to close at $100 or higher during the same time period, you deliver to me a clean random year eagle. Let me know. Would be entertaining to watch either way it goes. And, in the event that it is in violation of any forum rules of our most generous host, the prize could be donated to another deserving firum member.
My proposal was simply if UVXY closes at $100 on any day within the next year, you get 1oz of my silver. If it does not, i get an ounce of yours. If you didn't understand that, then you are in way over your head with UVXY. But good luck to you.
@RobM said:
Formula for VIX...
I don't think there is one for UVXY or what we are discussing. But here is what I propose (and it is scaled down from what I was initially thinking so as not to violate anything "taboos" as alluded to in the forum terms of service):
I will put up 1 ETH silver round in airtite capsule against 1 of your eagles. One year ago, UVXY was right around $100. Your premise is that an impending crashing market, and accompanying extreme volatility will overcome that decay, and then some. If UVXY closes at $100 or more (adjusted for any reverse splits) on any day within the next year (market close at 4pm EST 1/25/2023) I send you the shiny 1oz ETH round. But if UVXY fails to close at $100 or higher during the same time period, you deliver to me a clean random year eagle. Let me know. Would be entertaining to watch either way it goes. And, in the event that it is in violation of any forum rules of our most generous host, the prize could be donated to another deserving firum member.
My proposal was simply if UVXY closes at $100 on any day within the next year, you get 1oz of my silver. If it does not, i get an ounce of yours. If you didn't understand that, then you are in way over your head with UVXY. But good luck to you.
Yes, I understand your offer but I'm not taking the bet. I'm comfortable with my UVXY plays in the current environment and am confident that any decay will be more than compensated for in a market crash scenario.
OK, no hard feelings. All good. Maybe revisit down the road. But if/when we actually get the huge vol spike, will be interesting to see how much pain us involved since, i think you would agree, the Fed has forced most people into way overweighting their portfolios into stocks.
Yep. Would be like parking your insured car each night somewhere that you think it might get stolen so you can collect on a claim. You pay the premium and keep thinking that the car will go missing. Time passes, you pay another premium, and then another. Finally, it happens, the car dissappears (probably parted out in some chop shop). You call your insurance company, and a little gecko with a Cockney accent hands you a check for a mere fraction of the premiums you had paid due to depreciation. Meanwhile, your neighbor, Jerome P, is excitedly telling you how much he just made using the same strategy. You're like, "Jerome, how'd you manage to get such a return on investment." Jerome be like, "It only took two nights for my car to get stolen. I had to free up some room in my chop shop."
Kinda sounds like a financial derivative. There's a ton of them in places you'd never think about, unless you're in finance or on the inside.
That too! Remember all those credit default swaps during the housing bubble? Equivalent to buying homeowers insurance on your neighbors home, and then being spotted pouring gasoline around the house.
_ Try to think of the larger context of all the discussions we've had surrounding derivatives and insurance._
Try to keep things in the context of the current discussion, or at least make some reference to a relevant discussion if you are trying to make a point.
Q: Are You Printing Money? Bernanke: Not Literally
@jmski52 said:
_ Try to think of the larger context of all the discussions we've had surrounding derivatives and insurance._
Try to keep things in the context of the current discussion, or at least make some reference to a relevant discussion if you are trying to make a point.
Sorry. I tend not to focus on minutiae. One will never navigate the forest if looking at every tree.
We have recently witnessed the destruction of money without even a single FED interest rate hike.
We have recently witnessed the destruction of money without even a single FED interest rate hike.
We witnessed the destruction of money because of massive money printing. Destruction of money has nothing to do with rates hikes. Interest rates hikes will curb debt. Reducing debt is not money destruction, it is money salvation.
We have recently witnessed the destruction of money without even a single FED interest rate hike.
We witnessed the destruction of money because of massive money printing. Destruction of money has nothing to do with rates hikes. Interest rates hikes will curb debt. Reducing debt is not money destruction, it is money salvation.
The $100 in my checking account buys more assets (and debt) today than it did last week.
We have recently witnessed the destruction of money without even a single FED interest rate hike.
We witnessed the destruction of money because of massive money printing. Destruction of money has nothing to do with rates hikes. Interest rates hikes will curb debt. Reducing debt is not money destruction, it is money salvation.
The $100 in my checking account buys more assets (and debt) today than it did last week.
So if you witnessed the destruction of money without a single FED interest rate hike, how come your money can buy more? You got a Magic money tree?
The reduction in asset values is not money destruction. It is simply overvalued markets returning to normality. And who made them overvalued? The FED giveith and the FED takeith. And at the end of the day the FED will have given much, much more than it has taken.
We have recently witnessed the destruction of money without even a single FED interest rate hike.
Except for the favored few - the stock market internals are anemic - most stocks are already in a bear market. Wait until the market sees that earnings for those favored few stocks can't support their stock prices, then you will see real capital destruction.
Q: Are You Printing Money? Bernanke: Not Literally
Comments
you prevent "zero" with continuous splits. So if equities crash what is the upside. And will you see continuous reverse splitson the way back up? LOL
Give Me Liberty or Give Me Debt
large "put" (it actually took three of them) saved Wall St. today. Provided a nice rebound to cryptos which are currently trading the opposite direction of equities.
Guess who? Futures trending down again tonight. Wash, rinse, repeat tomorrow?
“Welcome to Fed Club. The first rule of Fed Club is: you do not talk about Fed Club. The second rule of Fed Club is: you DO NOT talk about Fed Club! Third rule of Fed Club: if someone yells “stop!”, goes limp, or taps out, the Fed is over.”
Give Me Liberty or Give Me Debt
I think you are getting your split definitions backwards. UXVY has never had a forward split. It has had 10 negative splits. If one had bought 60M shares at fund inception and held until now, they would have exactly 1 share left today. UXVY will likely never have a forward split as that would require the VIX surpassing all-time highs and staying there. Besides, if the PPT can rescue the markets at will (eventually even buy the market indices instead of just bonds), you are hoping against hope with UVXY.
my bad. i meant to say reverse splits. And if UVXY shoots to the moon, you don't think the custodian will provide relief to the price with splits?
Give Me Liberty or Give Me Debt
No worries.
That is correct. There is virtually no chance ProShares would ever need to do this. Once again, due the decay rate of it being a 1.5x leveraged fund, and the unlikelihood that volatility surpasses any prior levels in history by an order of magnitude. If a "perfect" trader had bought UVXY on 17 Jan 2020, days before the crash started, and waited until the exact moment of peak VIX on 20 Mar 2020 to sell, he/she would have made 9x their investment. If there were a volatility repeat of that now, UVXY might reach $100 (recent low of $11 x 9). That is the reality of it. And, even if that rarified level of volatility (VIX 80+) returns, and UVXY reaches $100, it will be less than 1/10 of its value at the peak of the 2020 volatility spike. Very short term, with nearly perfect timing, one can make money in UVXY, but over any substantial length of time, it's pretty much a guaranteed loss.
https://seekingalpha.com/article/4203362-all-leveraged-etfs-go-to-zero
the article discusses the lack of serious decay during a climbing market with 2 and 3X leveraged ETFs that profit on a climbing market. Can one assume that the same applies even more so during a declining market to an only 1.5X leveraged ETF such as UVXY that gains in price during an equities decline?
In other words am I correct in my belief that decay with UVXY during a market crash is negligible to overall UVXY performance as long as that volatility continues regardless of how long it lasts?
Give Me Liberty or Give Me Debt
That seems to be the case. Had you bought TQQQ in 2000 your basis (due to splits) would be 43 cents. It's high was $83.12 at the end of last year.
It is interesting that down days in the market don't always lead to up days with the VIX or UVXY
They reflect market volatility, not market direction. It appears that the most volatility occurs during market declines.
Give Me Liberty or Give Me Debt
"As long as that volatility continues"... What do you mean by that? If the VIX were to rise and keep on rising, sure UVXY would continue upward. But VIX isn't like a stock index that tends to go up over time (due to population growth, productivity gains, inflation, etc.). Fear isn't a growth stock. It tends to oscillate, over time, around some average. TQQQ has benefitted from the fact tht the NASDAQ has been on a tear over the 13 year period since inception. Way more up days than down days, and the only two losing years in the index were barely negative. So the decay, which is still there, is obscured by the outsized compounded gain. If the NASDAQ today was trading around what it was in 2010, TQQQ would look pretty bad. Still, you cant't apply the growth idea to UVXY.
https://www.google.com/amp/s/seekingalpha.com/amp/article/4397816-why-uvxy-is-bad-trade
And UVXY with "outsized compounded gain" (and a lower 1.5X leverage) during a market crash's volatility is different?
I have always recognized "decay" with leveraged ETFs but I remain committed to my belief that UVXY decay over time is small compared to the gains during extreme volatility (sudden drops in equity prices).
Give Me Liberty or Give Me Debt
Can someone put the above discussion in lay terms? I guess I have not kept up with the times. While I would like to understand what is being said, the fact I DO NOT may make it meaningless to me/others??????
ETFs Exchange Traded Funds, are similar to mutual funds but they trade, using their symbols, much more easily and just like stocks on the various stock exchanges. Like mutual funds they provide easy access to "baskets" of assets such as a group of mining companies or stock indexes. The additional leveraged ETFs offer 1.5, 2 or 3x the price movement of the underlying asset they represent and are more volatile (drastic price swings) than the underlying asset because of the "multiple" involved. There are even "Inverse" and Inverse leveraged ETFs that move in the opposite direction of the asset(s) it tracks. For example with an inverse gold ETF, its price would go up when the price of gold goes down with the amount being determined by its leverage multiple (1.5, 2 or 3X). Inverse ETFs provide opportunity to profit when the underlying asset is losing money. Leveraged ETFs are all derivatives (gambling) as they do not hold any of the assets that they track.
Leveraged ETFs lose value over time to "decay." Decay is the natural erosion of value over time unique to leveraged ETFs. The longer the leveraged ETF is held, the greater the decay. For this reasons it is advisable to not hold a leveraged ETF other than short term. UVXY tracks the VIX (stock market volatility index). The discussion is centered around my belief that explosive gains (as would be seen in UVXY in a stock market meltdown) far outweigh any UVXY loss of value because of its natural decay making concerns about decay irrelevant when holding UVXY leading up to and during a stock market crash.
Give Me Liberty or Give Me Debt
https://www.investopedia.com/terms/l/leveraged-etf.asp
Apologies for my contribution to getting this thread off topic. The link provides a good tutorial. But these leveraged ETFs are very complex, so it is true that most people buying them do not fully understand them. I sure don't. The point I am trying to make is that the VIX volatility index (and thus the UVXY ETF) are fundamentally different than a leveraged long fund seeking to magnify the gains of a basket of stocks that historically trend positive. The VIX does not trend up or down for any significant time, it merely fluctuates to varying degrees above some average. So due to the inefficiencies (decay) in the daily readjustment in the funds futures/options contracts, the UVXY share value trends down over time. So if you were to hold UVXY for a year or two, and then the S&P 500 collapses by, 40, 50, even 60% (i.e, fear and capitulation), you will still lose money. Does that help?
and this is where we disagree. My belief is that UVXY gains from a 50% drop in stocks would far outweigh the decay expense of holding the UVXY for one year prior to the stock market 50% loss.
What we need is an accurate formula for this specific case. Got one? lol
Give Me Liberty or Give Me Debt
It's all about what the people want...
Formula for VIX...
I don't think there is one for UVXY or what we are discussing. But here is what I propose (and it is scaled down from what I was initially thinking so as not to violate anything "taboos" as alluded to in the forum terms of service):
I will put up 1 ETH silver round in airtite capsule against 1 of your eagles. One year ago, UVXY was right around $100. Your premise is that an impending crashing market, and accompanying extreme volatility will overcome that decay, and then some. If UVXY closes at $100 or more (adjusted for any reverse splits) on any day within the next year (market close at 4pm EST 1/25/2023) I send you the shiny 1oz ETH round. But if UVXY fails to close at $100 or higher during the same time period, you deliver to me a clean random year eagle. Let me know. Would be entertaining to watch either way it goes. And, in the event that it is in violation of any forum rules of our most generous host, the prize could be donated to another deserving firum member.
your proposal is almost as complicated as your formula (that you provided). thanks for the offer but I'll ride this one alone.
Give Me Liberty or Give Me Debt
Not my formula.
My proposal was simply if UVXY closes at $100 on any day within the next year, you get 1oz of my silver. If it does not, i get an ounce of yours. If you didn't understand that, then you are in way over your head with UVXY. But good luck to you.
I'm not firum but I'm certainly deserving.
Ha, I left that typo in there because i didn't want to have that post as showing being edited.
Yes, I understand your offer but I'm not taking the bet. I'm comfortable with my UVXY plays in the current environment and am confident that any decay will be more than compensated for in a market crash scenario.
Give Me Liberty or Give Me Debt
OK, no hard feelings. All good. Maybe revisit down the road. But if/when we actually get the huge vol spike, will be interesting to see how much pain us involved since, i think you would agree, the Fed has forced most people into way overweighting their portfolios into stocks.
How is El Salvador doing?
Knowledge is the enemy of fear
Last I heard pretty good:
The whole worlds off its rocker, buy Gold™.
Kinda sounds like insurance.
Knowledge is the enemy of fear
Yep. Would be like parking your insured car each night somewhere that you think it might get stolen so you can collect on a claim. You pay the premium and keep thinking that the car will go missing. Time passes, you pay another premium, and then another. Finally, it happens, the car dissappears (probably parted out in some chop shop). You call your insurance company, and a little gecko with a Cockney accent hands you a check for a mere fraction of the premiums you had paid due to depreciation. Meanwhile, your neighbor, Jerome P, is excitedly telling you how much he just made using the same strategy. You're like, "Jerome, how'd you manage to get such a return on investment." Jerome be like, "It only took two nights for my car to get stolen. I had to free up some room in my chop shop."
Kinda sounds like insurance.
Kinda sounds like a financial derivative. There's a ton of them in places you'd never think about, unless you're in finance or on the inside.
I knew it would happen.
That too! Remember all those credit default swaps during the housing bubble? Equivalent to buying homeowers insurance on your neighbors home, and then being spotted pouring gasoline around the house.
Remember all those credit default swaps during the housing bubble?
My understanding is that there are a whole truckload of interest rate swaps that may very well be the financial system's undoing.
I knew it would happen.
It's happened before.
Give Me Liberty or Give Me Debt
Just added more ADA
Verily. Interesting how derivatives get blasted in one thread and praised in another.
Knowledge is the enemy of fear
_ Interesting how derivatives get blasted in one thread and praised in another._
lol, that wasn't praise.
I knew it would happen.
I didnt say you did. Try to think of the larger context of all the discussions we've had surrounding derivatives and insurance.
Knowledge is the enemy of fear
_ Try to think of the larger context of all the discussions we've had surrounding derivatives and insurance._
Try to keep things in the context of the current discussion, or at least make some reference to a relevant discussion if you are trying to make a point.
I knew it would happen.
Sorry. I tend not to focus on minutiae. One will never navigate the forest if looking at every tree.
We have recently witnessed the destruction of money without even a single FED interest rate hike.
Knowledge is the enemy of fear
We witnessed the destruction of money because of massive money printing. Destruction of money has nothing to do with rates hikes. Interest rates hikes will curb debt. Reducing debt is not money destruction, it is money salvation.
Give Me Liberty or Give Me Debt
The $100 in my checking account buys more assets (and debt) today than it did last week.
Knowledge is the enemy of fear
So if you witnessed the destruction of money without a single FED interest rate hike, how come your money can buy more? You got a Magic money tree?
Give Me Liberty or Give Me Debt
The reduction in asset values is not money destruction. It is simply overvalued markets returning to normality. And who made them overvalued? The FED giveith and the FED takeith. And at the end of the day the FED will have given much, much more than it has taken.
Give Me Liberty or Give Me Debt
Can you expand on that please. What assets are cheaper today than they were last week?
I think cohodk and derryb are using the phrase “destruction of money” in a different sense.
I'll never forget the days of TVIX, especially when the virus news hit the market.
Precious metals, equities, treasury bonds, cows, British pounds, Euros, lumber.
Knowledge is the enemy of fear
destruction of money = less buying power/value
Give Me Liberty or Give Me Debt
Correct. Money is not just the US dollar.
Knowledge is the enemy of fear
We have recently witnessed the destruction of money without even a single FED interest rate hike.
Except for the favored few - the stock market internals are anemic - most stocks are already in a bear market. Wait until the market sees that earnings for those favored few stocks can't support their stock prices, then you will see real capital destruction.
I knew it would happen.
with this outlook everything is money. lol
give you four used lawn chairs for an ounce of gold.
just because we price things with money it does not make those things money.
Give Me Liberty or Give Me Debt
So gold is not money?
Knowledge is the enemy of fear