ProShares Trust Ultra VIX Short Term Futures ETF (UVXY)

[eric4x]

Short-selling UVXY vs SVXY long.*

Here are the advantages and disadvantages, as I understand them:

UVXY is 2x and SVXY is 1x. So the gain of shorting UVXY should, at first glance, be twice the gain of SVXY long. But it goes beyond that. UVXY tends to drop because of contango, but BOTH funds lose money to fees. The built-in decay of SVXY makes it go up slower than it otherwise would, and the built-in decay of UVXY makes it go down faster than it otherwise would.*

For this reason, the gain of shorting UVXY would be MORE THAN twice the gain of SVXY long.*

However, short-selling carries the risk of a short-squeeze and a margin call, if or when the price goes up. This is the same for UVXY as it is for any proper stock, except that the risk is much greater. UVXY can suddenly jump in price, virtually without limit. For this reason, short sellers are advised to use a kind of "fractional reserve" system. You should only risk, let's say, one-fifth of your total portfolio, so you can be prepared for any spike.*

Of course, if you have reason to believe that a spike is coming, or that a spike already in progress will go much further, then you would have to close the short sale and get out quickly.*
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Note: I am just starting out, with a small account. My account size isn't big enough yet to follow anyone's trading strategy, including my own. So for the time being, I am just trying to gain basic trading experience, and see what I can learn for future reference.*