ProShares Short VIX Short-Term Futures ETFInvestment Thesis
ProShares Short VIX Short-Term Futures ETF (SVXY) is a fund that allows you to bet on a decline in volatility with a 0.5x ratio. That is, with a 10% decrease or increase in volatility, this fund will respond with a 5% movement in the opposite direction.
Volatility has significantly increased amid uncertainty due to mutual tariffs between the U.S. and the rest of the world. This presents good opportunities for opening long positions in SVXY.
The risk/reward ratio looks attractive, given that current VIX quotes are near the levels reached during the correction amid the pandemic in 2020. It is also worth noting that the share of S&P 500 components above the 50-day moving average is at local lows, which historically happens rarely and may signal a local potential for market recovery, and thus, a decline in the level of "fear" in the market.
In the base case scenario, we expect that countries will be able to reach agreements regarding the imposed tariffs, which will smooth out the overall impact on the U.S. economy and lead to a reduction in market uncertainty.
Target price – $46.8
Recommendation – Buy
Upside potential – 28%
We recommend setting a stop-loss at the level of $29.9.
