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Joseph VanDerveer

Joseph VanDerveer

Joseph VanDerveer is the Chief Technical Analyst with 8 years experience in the trenches trading the markets with a brand new website and service

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VIX Strategy, Maximum Profits $

Proshares UVXY 2x ETF

Everyone wants to find ways to maximize profits and minimize losses. That's part of the game in trading the market. I would consider this an extremely high risk/high reward trade.

First let me explain what the VIX is. The VIX is a 30 day fear gauge calculated from calls and puts. It can be one measure used to gauge investor's sentiment or mental state towards the market. As the VIX goes down the complacency goes up, or in other words a contrarian indicator to some.

UVXY is the ticker symbol for Proshares Ultra VIX ETF. During a market correction or crash as you will see in the chart, there is great movement in the etf.

Some would use this as a vehicle to buy if or when they believe a market correction or crash is coming up. Using leveraged etf's are meant for short term trades only. The value goes down over time, it is almost like an option with premium that decays over time.

One way a trader could play UVXY is to use options and the same goes for the VIX. I have not researched which one would be of better value for the movements using options. Maybe someone out there has but I have not. It is possible that there is greater value in the straight VIX options then its cousin UVXY 2x options.

It is extremely hard to predict a crash, some are able to do it but it is not easy. I would rather use these vehicles after the "event" not before. I will be researching these vehicles and their option counterparts to add to my toolbox as there will always be mini crashes or corrections along the way. The chart below is of UVXY. Notice the great movement in the 2 mini crashes over the last year, there will be more coming up. Be prepared for the next one. Everyone trades the market to make money. This is one tool that deserves attention.

Proshares UVXY 2x ETF
Larger Image

This is for research purposes only, please use your own judgement.

 

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