Market Overview

Reverse Split Coming for VIX ETF

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ProShares, the largest purveyor of inverse and leveraged ETFs, announced today it will reverse split the ProShares Ultra VIX Short-Term Futures ETF (NYSE: UVXY) on a 1-for-10 basis. The reverse split will apply to shareholders of record as of the close of the markets on September 6, 2012 and the fund will trade at its post-split price on September 7, ProShares said in a statement.

UVXY's ticker will not change. Reverse splits do not change the value of investors' holdings, but do result in investors owning a smaller number of shares at a higher price. For example, if UVXY were to be split in reverse fashion while the ETF is trading at $10 and an investor own 1,000 shares, the stake would be 100 shares at $100 each following the split.

The ProShares Ultra VIX Short-Term Future ETF seeks to deliver twice the daily returns of a basket of short-term volatility index futures contracts. Given the constant rolling of futures contracts volatility ETFs and ETNs must engage in to achieve the stated investment objectives, these products are rarely cheap and UVXY is no exception. The fund charges 0.95 percent per year.

Following the controversy surrounding the VelocityShares Daily 2x VIX Short-Term ETN (NYSE: TVIX) earlier this year, volatility ETFs and ETNs have been under intense scrutiny due to deep losses incurred by investors that buy and hold these products.

The most popular of the lot is the iPath S&P 500 VIX Short-Term Futures ETN (NYSE: VXX), which has plunged 97.3 percent since its February 2009 debut. TVIX is not yet two years old and has already tumbled by nearly 97 percent.

UVXY is arguably the most egregious offender of the bunch. The product will turn one in October and has already lost 97.4 percent of its value. Still, UVXY had $252 million in assets under management at the end of the second quarter.

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Posted-In: News Specialty ETFs New ETFs Stock Split Intraday Update Markets Trading Ideas ETFs

 

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