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Frequently Asked Questions

Dr K VIX Volatility Model
Do you ever short UVXY, as a 2x version of XIV? If not, why?

Great question. It's a matter of the black swan. If the market were to have a huge gap lower overnight, UVXY would skyrocket, much as it did in August 2015. If one were to have been short UVXY, that one day loss would have been massive. Meanwhile, the VIX Volatility Model was long UVXY after the beta tests were completed and the VIX Spiking Strategy was added. This resulted in a massive profit.

While such big down days are highly improbable, they are not impossible.

Thus while UVXY tends to trend lower MOST of the time, and while this may make shorting UVXY very tempting to short, there may be that one black swan day where it gaps higher by a huge amount.

And keep in mind that the market's action in August 2015 could have been much worse had the news been a lot more dire.


Published: Mar 22 2017