10-Q: VS Trust Reports Q2 2026 Results Amidst Volatility

VS Trust, comprising the -1x Short VIX Futures ETF (SVIX) and 2x Long VIX Futures ETF (UVIX), filed its Q2 2026 quarterly report, detailing mixed financial performance and significant market risk exposure.

Summary

• The filing covers the quarterly period ended June 30, 2026, for VS Trust, which includes the -1x Short VIX Futures ETF (SVIX) and 2x Long VIX Futures ETF (UVIX).
• SVIX reported a net increase in net assets of $22,166,439 for the six months ended June 30, 2026, while UVIX experienced a net decrease of $207,306,515 for the same period.
• Total expenses for SVIX for the six months were $1,769,340, and for UVIX were $3,931,368.
• The net asset value per share for SVIX was $23.88 and for UVIX was $61.68 as of June 30, 2026.
• Both ETFs are subject to significant market risks, particularly related to VIX futures contracts, and employ leverage, which amplifies both gains and losses.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as having a negative sentiment due to significant unrealized losses and the inherent risks associated with leveraged VIX futures ETFs, despite some positive operational income.

Positives

• SVIX reported a net increase in net assets of $22,166,439 for the six months ended June 30, 2026.
• SVIX generated net investment income of $155,612 for the six months ended June 30, 2026.
• Interest income for the six months ended June 30, 2026, was $1,924,999 for SVIX and $3,209,530 for UVIX.

Negatives

• UVIX experienced a significant net decrease in net assets of $207,306,515 for the six months ended June 30, 2026.
• UVIX reported a net investment loss of $721,838 for the six months ended June 30, 2026.
• Both ETFs incurred substantial unrealized losses on futures contracts, with UVIX showing a net change in unrealized depreciation of $75,180,533 for the three months ended June 30, 2026.
• The total return at net asset value for UVIX was -64.42% for the quarter ended June 30, 2026.
• The expense ratio for UVIX was 1.92% for the quarter ended June 30, 2026.

Risks

• Compounding risk: Daily rebalancing and compounding can cause performance to differ significantly from the stated multiple of the benchmark's return over longer periods.
• Leverage risk: The use of leverage, particularly in UVIX (2x), amplifies gains and losses, increasing the risk of total loss.
• Counterparty risk: Exposure to credit risk of counterparties for derivative transactions, although mitigated by collateral requirements.
• Liquidity risk: Difficulty in liquidating financial instruments at desired prices, especially in volatile or illiquid markets.
• Contango and Backwardation Risk: Rolling futures contracts can lead to losses if longer-term contracts are more expensive than shorter-term ones (contango).
• Market disruption: Events like natural disasters or pandemics can exacerbate volatility and impact the ability to achieve investment objectives.
• Correlation risk: Imperfect correlation between futures contracts and the benchmark can prevent the Funds from achieving their stated objectives.
• Regulatory changes: Evolving regulations for derivatives could materially impact the Funds.

Future Outlook

The filing does not contain specific forward-looking guidance beyond the inherent daily objectives of the ETFs. The performance of SVIX and UVIX is tied to daily movements in VIX futures, and their long-term performance is subject to compounding effects and market volatility.

Management Comments

• Management states that interim period results are not necessarily indicative of results for a full-year period.
• Management has evaluated the effectiveness of disclosure controls and procedures and internal control over financial reporting and concluded they were effective.
• Management has reviewed tax positions and concluded there is no tax liability from unrecognized tax benefits.

Industry Context

StockSavvy.ai notes that these ETFs operate in a highly specialized and volatile segment of the financial markets, focusing on VIX futures. Their leveraged and inverse structures are designed for short-term trading and carry significant risks, particularly concerning compounding and volatility, making them unsuitable for long-term buy-and-hold investors.

Comparison to Industry Standards

• The expense ratios for SVIX (1.70% for 6 months) and UVIX (1.96% for 6 months) are higher than typical broad-market ETFs, reflecting the complexity and active management required for VIX futures strategies.
• The significant unrealized losses reported by UVIX (-$206,584,677 for 6 months) highlight the inherent risks of leveraged inverse strategies in volatile markets, which can lead to substantial underperformance compared to unleveraged benchmarks.
• The total return figures for the quarter ended June 30, 2026, show SVIX with a positive 51.78% return at NAV, while UVIX had a negative -64.42% return, illustrating the divergent performance profiles driven by market conditions and the ETFs' objectives.

Legal Proceedings

• None reported.

Related Party Transactions

• Management fees are paid to Volatility Shares LLC (the Sponsor) at annual rates of 1.35% for SVIX and 1.65% for UVIX, based on average daily net assets.

Stakeholder Impact

• Shareholders of UVIX have experienced significant losses due to market volatility and the leveraged inverse strategy.
• Shareholders of SVIX have seen positive returns in the reported quarter, but the inherent risks of VIX futures ETFs remain.
• The complexity of these ETFs requires active monitoring by investors to manage risks effectively.

Next Steps

• Continue to monitor VIX futures market movements and volatility.
• Rebalance portfolios daily to maintain target exposure to VIX futures contracts.
• Manage collateral for derivative positions.

Key Dates

Recommendation

The filing presents a mixed picture. While SVIX has shown positive performance in the short term, the significant losses and inherent risks associated with UVIX, coupled with the complex nature of leveraged VIX futures ETFs, warrant a cautious approach. The high volatility and compounding effects make these instruments unsuitable for most investors. A 'hold' recommendation reflects the need for investors to carefully consider their risk tolerance and investment horizon, given the specific objectives and risks of these ETFs.

Keywords

VIX Futures, Leveraged ETF, Inverse ETF, Volatility, Futures Contracts, Options Contracts, Derivative Instruments, Commodity Pool