The VS TR 2x Long VIX Futures ETF (UVIX) is experiencing upward momentum as market participants seek hedges amid signs of strain in the ongoing stock rally. According to strategists at Bank of America Corp., the VIX call skew remains elevated, indicating that market makers are holding shorter option delta positions. This imbalance has not fully reset since the volatility spike in early August, prompting investors to pay close attention to long convexity strategies. The heightened VIX call skew suggests that traders are preparing for potential volatility, which is reflected in the increased demand for volatility-linked products like UVIX.
Additionally, recent economic indicators have contributed to the market's cautious stance. The U.S. economy added 256,000 jobs in December 2024, surpassing expectations and signaling a robust labor market. This, coupled with rising inflationary pressures in the services sector, has led traders to reassess their expectations for Federal Reserve rate cuts in 2025. The combination of these factors has heightened market uncertainty, further driving interest in volatility hedges.
The UVIX ETF rose to $4.04, marking a 3.46% increase as of 10:00 AM ET on January 13, 2025.