Why the UVXY is Important For Traders


One of the "stocks" we discuss most on Money Morning LIVE is UVXY, which technically isn't a stock at all. Its proper name is ProShares Ultra VIX Short-Term Futures ETF, and it's one of the few products on Wall Street actually built to go lower over time. Day trading expert Kenny Glick is always keeping an eye on UVXY because when it does move higher, it could mean trouble for stocks. 

You can listen to a broader explanation on UVXY in the video below, and see for yourself how bad this "stock" has been over the years.

To sum it up, it's generally a HORRIBLE IDEA TO BUY AND HOLD UVXY

 


But UVXY Still Has Its Place...

 

Basically, what's "inside" UVXY are VIX futures contracts that eventually go to ZERO, and that's why UVXY will always go lower over time. When the share price gets a little too low, UVXY does a reverse split, and the whole process repeats itself again. 

But UVXY still has its place in the trading universe. For starters, it can be a great target for short sellers since it's literally designed to go lower. However, our traders at Money Morning LIVE all agree that UVXY is always best served as a very short-term trading instrument. Too often traders aren't aware how this instrument works, and it burns them BADLY. 

Besides actually trading UVXY, this ETF can signal serious volatility in the market whenever it goes up and stays up. In other words, if the UVXY is green, stocks could come under pressure. Sharp increases in the UVXY can sometimes foretell further selling in the market, as Kenny discusses in the video below. 

 

 


Hopefully this helps some of you understand how UVXY works and what purpose it serves in the market. Simply by understanding this one odd asset, you can have an edge over a number of other traders in the market. You can learn more from Kenny Glick with his free This Is VWAP newsletter.