#2 ProShares Trust Ultra VIX Short Term Futures ETF (NYSEARCA:UVXY)
For the same reason that Path S&P 500 VIX Short Term Futures TM ETN (NYSEARCA:VXX) has been a bad performer in the long run, ProShares Trust Ultra VIX Short Term Futures ETF (NYSEARCA:UVXY) is also a bad performer. Contango, volatility has historically been mean reverting, and it’s mathematically impossible for volatility to continue to go up meaningfully every day indefinitely. Due to the fact that it’s a leveraged ETF, UVXY also has the volatility factor going up against it too. Say underlying volatility went up 10% in one day and then went down 10%. So it would be 0.99 of the original value because the end result would be 0.9 for the first step and 0.9*1.1 = 0.99 for the second step.
For UVXY, it’s worse. Due to the fact that it’s 2x, the losses are magnified: 0.8 for the first step and 0.8*1.2 = 0.96 for the second step. That’s a 0.03 slippage rate.
That said UVXY is very dangerous to short. If volatility surges, UVXY can lose their shirts and feel a lot of pain.