RE:RE:This Widowmaker Connn Tango!
Hi Murraylaplante, hopefully my early years of lessons--which in markets stands for losses--can help you a bit.
HVU is not a company stock, it's an ETF (Exchange Traded Fund). It attempts to replicate 2x the price action of the S&P VIX (not to be confused with the CBOE VIX). The S&P VIX typically moves inverse to the S&P 4:1. That is, if the S&P FALLS 1%, the VIX RISES 4% (and vice versa). Since HVU is double leveraged (2x) it aims to produce double the price action of the VIX.
The summary of the math is HVU typically moves ~8x inverse (opposite direction) the S&P futures index. For example S&P was up +0.66% today and HVU was down -5.86%, or 8.87x inverse to the S&P. The 8x relationship is not exact and is only a general guideline as many factors can distort the relationship, like decay (look up leveraged ETF decay for this explanation)...
AND most importantly: CONTANGO (which is likely causing the recent distortions IMO).
Since the entire HVU fund holds futures, it is subject to two common futures market conditions: Contango and Backwardation. Contango is a normal futures market condition where future month's futures contracts are more expensive that current month's (for reasons like carrying costs, insurances, etc). Backwardation is a rarer condition where present month's contracts are more expensive than future month's contracts (typically because of sudden increased current demand, or a shortage depending on which futures market). When futures expire each month they get rolled over into the next month. Fictional examp: If the current month contract is at $10, and the next future month contract is at $12 (contango market), you need to pony up another $2 per contract combined with the $10 of your current month contract to roll into the next future month contract at $12. Likewise if current month is $10 and next month is only $8 (backwardation), you save $2 when rolling into that contract.
This applies to HVU because it rolls into next month's contracts every trading day which exposes the fund to contango, putting downward pressure on the price of HVU. Conversely backwardation puts upward pressure on HVU price. We are currently in contango but this can switch very quickly. The higher the price of the next month contract the "deeper" the contango is said to be.
You can find current VIX contango/backwardation here: https://vixcentral.com/
You can find current HVU holdings and commodity roll here: https://www.horizonsetfs.com/ETF/HVu (click holdings at the bottom, updated daily).
I'm not licensed to give financial or investing advice, these are merely the mechanics of HVU and the futures contracts it holds. And while I am currently long HVU, in good conscience I cannot recommend someone to invest in something they do not understand. It's simply foolish. I don't call this thing the widowmaker for nothing!
It will perpetually work towards zero and typically only bounces for short periods of time during market crashes so it doesn't "come back" like a stock, and it shouldn't be held long term as it continually decays over time. It's meant for shorter time frame trades (1 day to multi-month max depending on the opportunity).
Hope this helps,
The Captialist GrrrrrrrrIIZZly Bear