A question I often see that comes up in
online chats and tweets, especially during an overnight market event
is how do I know what the value of UVXY is? Afterhours closes at 8pm
ET so it's impossible to know what UVXY is doing until the premarket
opens the next day, right? Absolutely not!
Once you have a few pieces of
information, you can set up a spreadsheet fairly easy and determine
for yourself what the value of UVXY, TVIX, or any other VIX Product
is during the overnight hours. It even works for the short funds like
SVXY and XIV, just with a different calculation. So what do you need
to get started? First it helps to understand how UVXY derives its
value.
UVXY is an average of the first two
months of VIX futures. In most cases, paying attention to the
percentage change in these futures from the previous close is all you
need to determine the value of UVXY. So here's the list of what you
need:
- Daily settling price of VIX futures
- Closing price of UVXY.IV at 4:15pm
- A realtime quote of VIX futures overnight
Once you have that information, you can
determine, for yourself, what the value of UVXY is doing overnight.
Let's look at each piece individually.
Daily settlement price of VIX
futures. VIX futures trade until 4:15pm. They do NOT close at
4pm with the rest of the market! This is important to know
because frequently VIX futures can make very large moves in those
last 15 minutes. This oversight can make it appear that UVXY should
be down the next day when it is actually up or vice versa. The values
are available directly off of CBOE's website for free, and usually
published within minutes of the close of trading.
http://cfe.cboe.com/market-data/vx-futures-daily-settlement-prices
 |
| Source: CBOE |
The prices to pay attention to are for
the two nearest months of VIX futures. Although CBOE posts the values
for all weekly contracts that are available, the only ones you need
to pay attention to are the monthly ones (VX). For example, as of
Friday, August 25, 2017, the September (9/20/17) future closed at
13.075 and the October (10/18/2017) closed at 14.025.
The next thing you need to know is the
proportion of contracts that UVXY holds between September and
October. The fund doesn't just hold the first month of futures. Every
day, the fund rolls an equal portion of them every day to the next
further month so that on the day right before September future
expiration, the fund already has all its assets in the October
future. The process is described in significant detail in the
prospectus, but for our purposes, assume that the
proportion changes equally every trading day. So how do you do this?
The roll period is how
many trading days there are between contract expiration dates. Start at the beginning of a roll period. For example, the August 2017
VIX future expired on August 16, 2017. That means on the night before
at 4:15pm, UVXY was holding all of its assets in the September future
(the fund never hold futures until expiration morning, it always
trades out of them the afternoon before). Now, counting the trading
days between that day and the September expiration gives you 24.
(Five weeks of trading minus one day for the Labor Day holiday). That
means every single day, the fund is going to sell 1/24 (or 4.166%) of
its September futures to buy the October future. For every day that
you move along in the trading month, the fund has 1/24 less September
future and 1/24 more October future. On a calendar it would look like
this:
When you know the exact
proportion of futures every single trading day you can start
calculating the weighted average of those futures every day. Using the August 25 settlement prices above, you see that UVXY would have
had 16/24 (or 66.667%) in the September future and 8/24 (or 33.333%)
in the October future. The closing price of September future was
13.075 and the closing price of October was 14.025. Doing a simple
weighted average calculation you get:
( 16 / 24 * 13.075 ) + ( 8 / 24 *
14.025) = 13.3917
The weighted average value of VIX
futures in the fund is 13.3917. Knowing this value, you need to apply
it to UVXY's closing indicated value.
UVXY Indicated Value.
This is actual value of the fund. This quote is available on most
trading platforms with some variation of IV in the ticker (TDA:
UVXY.IV, Fidelity: UVXY/IV) and also available as a delayed quote on
Yahoo under the ticker ^UVXY-IV. Sometimes the market price will
trade away from the actual price of the fund due to supply and demand
of shares. So it's important to know the actual indicated value of
UVXY rather than what price it may have traded for at any given time.
This
is useful at the close of trading. Trades don't always happen at the exact closing value of the fund at the end of the day,
so if you attempted to base your calculations on a last trade rather
than the accurate indicated value of the fund, your calculations
could be wrong and not understand why.
Remember
that VIX futures trade until 4:15pm. This means that UVXY actually
trades until 4:15pm as well. It doesn't matter what the closing price
of UVXY is at 4pm. Although 4pm is where many quotes stop for the
day, if you attempt to use this closing price for your calculations,
they will simply be wrong. The only accurate way to calculate your
own value for UVXY is to base it on the 4:15pm closing price of
UVXY.IV or NAV as reported by Proshares. The actual published value
is available in CSV format on Proshares' website at
https://accounts.profunds.com/etfdata/ByFund/UVXY-historical_nav.csv
or you can use the closing value of UVXY.IV from another source such
as your broker's trading platform or Yahoo.
Continuing
to use August 25 as an example Proshares listed the NAV or closing
quote for UVXY.IV as 30.5954.
Knowing that a weighted VIX future of 13.3917 is equal to
UVXY of 30.5954, you can start calculating the change at any time of
day. The next thing you'll need are realtime quotes for VIX futures.
Realtime VIX Futures Quotes.
These can be harder to come by since most futures quotes are not
available for free in realtime without a subscription or an account
at a broker. You would need a platform which allows futures trading
such as TDA Think or Swim, Interactive Brokers, or some other full
service broker. If you do not have a futures account, you can still
get delayed quotes from CBOE, vixcentral.com, or investing.com.
Remember that you need futures quotes for both of the next two
months, so the first month's futures quote is not good enough if you
want a very accurate quote.
Honestly,
if you're calculating UVXY value overnight out of curiosity, delayed
futures quotes are probably just fine. Continuing with the example from August 25, let's go ahead and grab some delayed quotes
from vixcentral.com. (By the way, this is an awesome website which
has lots of historical data and should be on anyone's list of
resources if they trade VIX products.)
Let's
say vixcentral.com is showing something like this:
 |
| Source: vixcentral.com |
So the August future is at 13.15 and the October future is at 14.08.
Using
the same calculation as before, you need to get a new weighted average
using those values.
( 16
/ 24 * 13.15 ) + ( 8 / 24 * 14.08) = 13.46
Now figure out what the change in that average was since Friday's
close:
13.46
/ 13.3917 = 1.0051, or a gain of 0.51%
To
apply that to UVXY, you double it (UVXY is a 2x leveraged fund so it
moves twice as much as the change in the VIX futures value from one
day to the next):
0.51%
* 2 = 1.02%
Then add that to UVXY.IV's closing price from Friday night
30.5954 + ( 30.5954 * 1.02%) = 30.9074
And
just like that you have your new value for UVXY! Although the examples
used UVXY, the same process also works on TVIX if you follow that.
Short funds such as SVXY and XIV have exactly the same calculations
except in inverse (they increase in value when future price drops).
Just remember that proportion of futures changes incrementally every
day. The next day would see a September proportion of 15/24 and an
October proportion of 9/24.
For
easier use, I have set up a spreadsheet to do all these calculations
for me every day. Since VIX futures trade nearly 24 hours a day, it
doesn't matter whether US markets are closed, I can still keep tabs
on my position overnight.
I
have included a link to a downloadable google docs version of a simple spreadsheet
that performs these calculations.
https://docs.google.com/spreadsheets/d/1QOWyuQOlH9VHwwtGWu063vqwuHvb-5UR7-ww7ut6Lac/edit?usp=sharing
Happy
VIX Trading!
Eric Vymyslicky
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