This volatility ETF is designed to track a leveraged multiple of the daily return of VIX short-term futures, which are tied to the volatility index. It rises sharply when market volatility spikes, and its exposure is reset on a daily basis.

It suits active traders who want to hedge against a market plunge or make short-term bets on a volatility spike, and who are willing to accept very high risk.

It is a passive (index-tracking) ETF managed by ProShares.

The fund uses derivatives to build leveraged exposure to the daily return of VIX short-term futures, and it resets that exposure every day. Because the VIX futures curve is usually in contango, value is eroded each time contracts are rolled, and combined with the daily reset, this causes value to decline rapidly over the long term.

• Daily leveraged exposure to VIX short-term futures
• A hedging tool that responds to volatility spikes

Assets under management (AUM) are $194.0M, and the total expense ratio is 0.95% per year.

The main points of comparison with VIXY and VXX, which offer unleveraged volatility exposure, are the leverage multiple and the erosion of value.

Volatility products surge when the market falls sharply and volatility spikes, but they tend to drop quickly once the market stabilizes. Contango in VIX futures and the daily reset combine to erode value over time, so losses from long-term holding are nearly certain.

Fund flows in volatility products vary widely depending on fears of a market plunge and demand for hedging, and short-term hedging and speculative money sometimes flows in when market uncertainty rises. It is also worth noting that performance varies greatly depending on the volatility environment and the shape of the futures curve.

The strong rebound during volatility spikes is both its strength and its risk, while value erosion from contango and the daily reset, along with its unsuitability for long-term holding, are factors to consider.

For unleveraged volatility exposure, there are options such as VIXY and VXX. For bets on falling volatility, the inverse product SVXY is available, and for longer-dated VIX futures, products such as VIXM are also worth comparing. The three products shown in the table, TQQQ, SSO and SOXL, are equity index products that track the Nasdaq, the S&P 500 and a semiconductor index with leverage, so their underlying assets differ from this product, which bets on volatility. What sets this ETF apart is its structure of tracking VIX short-term futures with daily leverage.

Here are the points to review before investing in UVXY. The strong rebound during volatility spikes is attractive, but value erosion, long-term losses and extreme volatility should be checked in advance. It is best to approach it only after fully understanding how volatility products are structured.

Value erosion from VIX futures contango and the daily reset is the main driver of performance, and holding for the long term almost certainly leads to a large loss in value. Because leverage is applied to volatility, price swings are extremely large, and the product is not suitable for anything other than short-term hedging and trading.

It is a candidate only for ultra-high-risk traders who want to hedge against a market plunge or make short-term bets on a volatility spike. For unleveraged volatility exposure, products such as VIXY and VXX are options, and if you want a short-term volatility bet or hedge, it is advisable to choose this product only after fully understanding its structure and value erosion.