ProShares Ultra VIX Short-Term Futures ETF (UVXY) is a 1.5x leveraged exchange-traded fund that aims to replicate the performance of an index of near-term VIX futures on a daily basis. This financial instrument is strategically designed for investors seeking to capitalize on short-term surges in market volatility.
Following a five-week stretch of trading above the $26 mark during April and May, volatility saw a decline. In the week before last, UVXY moved into a tighter range between $20.5 and $23. However, by the market's close on May 24, it once again approached the $26 threshold. As trading commenced today, the price settled near $23.5. This presents a potentially lucrative entry point, influenced by several factors that suggest an uptick in implied volatility in the forthcoming days.
First, persistent uncertainty looms over the U.S. tariff policy landscape. Late last week, President Donald Trump declared the imposition of a 50% tariff on EU goods, initially set to take effect on June 1. This announcement triggered a market correction and heightened volatility. However, over the weekend, Trump postponed the implementation of these tariffs to July 9, offering some respite to market participants. However, trade risks continue to linger. Any forthcoming announcements hold the potential to reignite fears of market volatility.
Second, the US Department of Treasury will conduct auctions for 2-, 5-, and 7-year bonds between May 28-30, amounting to approximately $183 billion. In the wake of the recent downgrade of the U.S. sovereign rating by Moody's, investor scrutiny of demand for these Treasury bonds has heightened considerably. Should the auctions exhibit weak demand, it could prompt a rise in yields, thereby exacerbating instability within the capital markets and leading to a short-term surge in volatility.
Additionally, pension fund rebalancing is anticipated by the month's end. Some stock market participants estimate that potential share sales could reach $19 billion, adding pressure to stock indices due to a lack of offsetting demand.
Finally, on Wednesday, May 28, Nvidia is set to report its quarterly earnings, being the last of the Magnificent Seven group to do so. The company's stock has been trading within a range for a year, but a recent rally has generated high investor expectations. Investors will closely scrutinize the company's outlook, as the absence of indications for accelerating earnings growth could mean insufficient drivers for continued stock growth, particularly amid intensifying competition in the AI sector.
The UVXY instrument exhibits high sensitivity to short-term market fluctuations. During periods of market calm, its value tends to decline gradually due to the adverse structure of the futures curve. Therefore, if one of the described scenarios materializes, it is advisable to take profits once the target is achieved or adjust the position to break even.
The price target is set at $26.5, with a "Buy" recommendation. At the time of analysis, the current price stands at $22.6, indicating a growth potential of 17%. A stop-loss is advised at $19.
Following a five-week stretch of trading above the $26 mark during April and May, volatility saw a decline. In the week before last, UVXY moved into a tighter range between $20.5 and $23. However, by the market's close on May 24, it once again approached the $26 threshold. As trading commenced today, the price settled near $23.5. This presents a potentially lucrative entry point, influenced by several factors that suggest an uptick in implied volatility in the forthcoming days.
First, persistent uncertainty looms over the U.S. tariff policy landscape. Late last week, President Donald Trump declared the imposition of a 50% tariff on EU goods, initially set to take effect on June 1. This announcement triggered a market correction and heightened volatility. However, over the weekend, Trump postponed the implementation of these tariffs to July 9, offering some respite to market participants. However, trade risks continue to linger. Any forthcoming announcements hold the potential to reignite fears of market volatility.
Second, the US Department of Treasury will conduct auctions for 2-, 5-, and 7-year bonds between May 28-30, amounting to approximately $183 billion. In the wake of the recent downgrade of the U.S. sovereign rating by Moody's, investor scrutiny of demand for these Treasury bonds has heightened considerably. Should the auctions exhibit weak demand, it could prompt a rise in yields, thereby exacerbating instability within the capital markets and leading to a short-term surge in volatility.
Additionally, pension fund rebalancing is anticipated by the month's end. Some stock market participants estimate that potential share sales could reach $19 billion, adding pressure to stock indices due to a lack of offsetting demand.
Finally, on Wednesday, May 28, Nvidia is set to report its quarterly earnings, being the last of the Magnificent Seven group to do so. The company's stock has been trading within a range for a year, but a recent rally has generated high investor expectations. Investors will closely scrutinize the company's outlook, as the absence of indications for accelerating earnings growth could mean insufficient drivers for continued stock growth, particularly amid intensifying competition in the AI sector.
The UVXY instrument exhibits high sensitivity to short-term market fluctuations. During periods of market calm, its value tends to decline gradually due to the adverse structure of the futures curve. Therefore, if one of the described scenarios materializes, it is advisable to take profits once the target is achieved or adjust the position to break even.
The price target is set at $26.5, with a "Buy" recommendation. At the time of analysis, the current price stands at $22.6, indicating a growth potential of 17%. A stop-loss is advised at $19.
Penafian
Maklumat dan penerbitan adalah tidak dimaksudkan untuk menjadi, dan tidak membentuk, nasihat untuk kewangan, pelaburan, perdagangan dan jenis-jenis lain atau cadangan yang dibekalkan atau disahkan oleh TradingView. Baca dengan lebih lanjut di Terma Penggunaan.
Penafian
Maklumat dan penerbitan adalah tidak dimaksudkan untuk menjadi, dan tidak membentuk, nasihat untuk kewangan, pelaburan, perdagangan dan jenis-jenis lain atau cadangan yang dibekalkan atau disahkan oleh TradingView. Baca dengan lebih lanjut di Terma Penggunaan.