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ProShares Short VIX Short-Term Futures ETF benefits from falling volatility; post-election VIX normalization makes it less attractive, prompting a 'Sell' rating to take profit. SVXY is not suitable for buy and hold due to potential significant drawdowns from sudden volatility spikes. The fund should be bought when VIX spikes due to external events and sold after volatility subsides.
ProShares Short VIX Short-Term Futures ETF (SVXY) offers 0.5x exposure to shorting VIX futures, making it a unique "leveraged" ETF. SVXY has outperformed the highly popular Simplify Volatility Premium ETF (SVOL) and the overall market in the last 3 years. SVXY behaves differently in extreme cases, such as during the market drop in March 2020, but has performed well overall.
Markets love volatility, but current conditions suggest a high volatility risk-off event is possible in the near-term. The ProShares Short VIX Short-Term Futures ETF has performed well by shorting volatility, but it carries the risk of crashing. The counterparty risk and potential for significant losses make SVXY a risky investment, especially during periods of market turmoil or heightened volatility.
Volatility sellers have profited from the rebound in equity prices in 2023, but selling at current levels could be risky due to potential increases in volatility. Despite equity volatility returning to 2021 levels, market dynamics have changed with monetary policy acting as a headwind and less aggressive fiscal policy. Bond volatility remains high compared to equities, suggesting that equity volatility traders may have discounted market risks too quickly.
FAQ
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