Sunday, October 26, 2014

Does the $UVXY decay over the weekend?

Someone on Stocktwits made a comment that you should never hold the $UVXY over the weekend because you loose (sic) 2% due to decay.  I ran the numbers going back to when the UVXY was established to check that statement.

The UVXY is the Proshares Ultra Short term VIX futures ETF, which is a measure of volatility in the SPY futures times two.  This ETF was created in 2011.  Since its inception, it has declined in price by close to 98%, due to its design.   The question is whether this occurs over a weekend. 

The results?  The UVXY moves a lot over the weekend, but there is no clear trend.  Actually, the net change from Friday close to open Monday averages out to almost nothing.  Some weeks it moves up, some down, but overall, it is almost exactly zero (0.12%). 

Most of the move in $UVXY happens intraday, not over night.  Personally, I don’t ever recommend holding this ETF because of the decay mentioned.  But it’s not about the weekend.

This post is not a recommendation to buy or sell any investment.  Disclosure: as of posting date I have no position in $UVXY, but I often buy and sell and may at any time.