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[Zephyr]

ProShares Announces ETF Splits: Volatility Fund to See 1-for-5
By Chris Dieterich
May 5, 2015, 10:32 A.M. ET

The market’s largest provider of geared exchange-traded funds last week announced a slew of splits and reverse splits that take effect in the weeks ahead.

That means it’s time again for investors to take inventory on whether they own too much of these fast-moving funds.

One fund on the list that stands out is an ETF that is particularly popular with traders who deal in fear, meaning the CBOE Volatility Index, or VIX.

The ProShares Ultra VIX Short-Term Futures ETF (UVXY) will undergo a 1-for-5 reverse split that takes effect at the opening bell on May 20. Holders get one share of the ETF for every five they own.

Splits and reverse splits are forms of housekeeping by ETF providers. The splits will not change the value of a shareholder’s investment, but traders don’t want a fund that’s too pricey, or too cheap. In the case of UVXY and eight other ETFs, shares were getting too cheap.

While spits are generally a wash economically, fractional shares that can lead to unplanned gains (or losses) and, thus, unplanned tax events. This blogger noted the phenomenon in the Barron’s print segment a while back.

Twelve other funds, including the ProShares Ultra Nasdaq Biotechnology ETF (BIB), are undergoing 2-for-1 stock splits. For these, prices have gotten awful high. BIB’s shares are up 22% this year to $153.

As Barron’s has noted previously, getting caught in a split provides a chance to reflect about whether you’re holding these zippy funds longer than you should. More to the point: why are you trading leveraged ETFs at all?

The ProShares volatility ETF is already down more than 60% during 2015. In fact, this blog noted an unusually hefty options trade that profits if UVXY falls much, much more. And guess what? That trade is making money!