Replies to post #3084 on ProShares Trust Ultra VIX Short Term Futures ETF (UVXY)

[DrContango]

Doc, do you have a good entry point at which you would buy UVXY?

Sir Option:

You obviously misdirected this question to me rather than one of the many day-gamblers on this board.

Yesterday I wrote you:

Spend a few hours reading all of StingRay and my posts from April to understand how these V-proxies work!!!

Had you done so, you would have written to StingRay or myself this instead:

"Wow, that contango and decay shyte gives me really unbeatable odds. What is a good entry point to SELL UVXY SHORT or to buy puts????"


Doc

“Do not worry about your difficulties in Mathematics. I can assure you mine are still greater.”
--- Albert Einstein

[DrContango]

I see the futures are down today - How can one calculate when it turns back up.

VIX 12.78 -0.07
VX K3-CF 13.85 -0.40
VX M3-CF 14.90 -0.35
VX N3-CF 15.86 -0.34
VX Q3-CF 16.45 -0.25

Sir Option:

I'm glad that you found the CBOE VIX micro site!!!

Now start using vixcentral.com.

Next, stare at this graph until it burns an image into your retina:




My Ouija board is broken and my person Jinn refuses to grant me any more wishes, so I cannot tell you when the futures will go back up. I can calculate what UVXY will be based on the futures. Computers are needed to calculate the VIX.

But futures CANNOT be calculated. They are bid by traders predicting where the VIX will close at at a certain date in the future.

And that next important date is the close of trading two weeks from now, May 21, the next expiry date of VIX futures.

And on that date two important things will occur!

#1 The spot VIX and K3 (May futures) will converge and close the gap to nearly zero.

Yesterday VIX closed at 12.66 and K3 at 13.88 with a gap of 1.22, a contango of 8.8% down from K3.


#2 At that time, the V-Proxies will be 100% comprised of M3, June futures.

And M3 will approach K3's position relative to VIX. Yesterday M3 closed at 14.93. a contango of 7.56% to K3.

So what I CAN calculate, is that if the VIX futures rise in the next two weeks, any price increase of VXX and UVXY must overcome that 7.6% contango as headwind.


And I predict that if the VIX remains unchanged in two weeks, VXX will most likely drop ~ 6-7% and UVXY will drop another 12 to 15%!!!

And that I can calculate!!!


Doc