Inverse ETFs in Singapore: How SQQQ, UVXY and Volatility ETFs Work

In the 12 months to 30 September 2026, ProShares Ultra VIX Short-Term Futures ETF (UVXY) returned −67.08% at net asset value. Over the same year, the S&P 500 rose 15.74%, and SPXS, which aims for minus three times the index's daily move, returned −32.16%. Both are products people buy to profit from a falling or nervous market, and both lost heavily in a year when the market rose.

An inverse ETF is an exchange-traded fund that aims to move in the opposite direction to an index for a single day. ProShares UltraPro Short QQQ (SQQQ) seeks daily results that correspond to three times the inverse (−3x) of the daily performance of the Nasdaq-100, before fees, and its summary prospectus dated 28 September 2026 lists total annual operating expenses of 0.94%. A volatility ETF such as UVXY is a different product again: it holds VIX futures contracts, which move differently from the VIX index quoted in the news.

Investors in Singapore reach these funds through brokers with US market access. Brokers here generally treat leveraged, inverse and volatility ETFs as Specified Investment Products (SIPs), so you go through a Customer Account Review before your first trade.

The choice comes down to three exposures that are easy to mix up: an unleveraged inverse fund such as SH or PSQ, a leveraged inverse fund such as SQQQ or SPXS, and a fund linked to VIX futures such as VIXY or UVXY. Each reacts to a different market move and loses value in its own way.

This guide explains how SQQQ and other inverse ETFs work, why a flat market can still cost you money, what UVXY actually tracks, how the funds compare, how to buy them from Singapore, and when a hedge built with them fails.

Inverse and volatility ETFs at a glance

All six funds are US-listed, trade in US dollars and reset or roll their exposure every day. They split into two groups: funds that move against a share index, and funds linked to VIX futures.

Six inverse and volatility ETFs grouped by what they track, with daily target, fee and 1-year return

Source: ProShares SH, ProShares PSQ, SQQQ summary prospectus, Direxion SPXS fact sheet, ProShares VIXY, ProShares UVXY (as of 25 October 2026). SQQQ's figure is the total from its summary prospectus dated 28 September 2026.

How SQQQ works

SQQQ uses swaps and futures to take a short position worth about three times its assets in the Nasdaq-100. When the index falls 1% in a day, the fund aims to gain about 3%; when the index rises 1%, the fund aims to lose about 3%. At the close, it rebalances so the short exposure is again three times its new assets.

A −3x daily objective over two days

The daily reset means two days rarely add up the way you expect. Say the Nasdaq-100 falls 5% on day one and rises 5.26% on day two, returning to its starting level.

Example only. Assumes exact daily targets, no fees, no financing costs and no tracking error.

SQQQ gains 15% from 100 to 115, then loses 15.79% of a larger base, ending at 96.84. You were right that the market would fall on day one, and the fund still finished down 3.16% once the index recovered.

Why SQQQ can fall when the Nasdaq-100 goes nowhere

The loss grows with the size of the swings. SQQQ's prospectus estimates that if the Nasdaq-100 is flat for a year, the fund returns −5.8% at 10% index volatility, −31.3% at 25% and −77.7% at 50%, before fees and financing. A −1x fund suffers much less from the same volatility.

Source: SQQQ summary prospectus for the −3x figures at 10%, 25% and 50% (as of 25 October 2026). Other cells are an example only, using the approximation 1 − e^(−(L² − L)σ²/2) with L = −3 or −1, which reproduces the prospectus figures; all exclude fees and financing.

The drag on a −3x fund is larger than on a 3x bull fund at the same volatility: 31.3% at 25% volatility, against 17.1% for a 3x fund in TQQQ's prospectus. For an inverse fund, the constant in the formula is L² − L = 12 when L = −3, against 6 for L = 3. You can check any path yourself:

fund = 1.0
for day in [-0.05, 1/0.95 - 1]:
    fund *= 1 + (-3) * day
print(round((fund - 1) * 100, 2)) # -3.16

Real results: SPXS against the S&P 500

SPXS gives the same picture on the S&P 500. With the index up 15.74% over the year to 30 September 2026, minus three times that return would be −47.22%, and SPXS returned −32.16%. In a rising market, the reset works in the holder's favour by shrinking the short position after each loss. Over 10 years to the same date, SPXS returned −41.31% a year at NAV.

How UVXY works, and why it does not track the VIX

The VIX is a Cboe index that measures the volatility the options market expects from the S&P 500 over the next 30 days. You cannot buy the VIX directly. Funds such as UVXY buy VIX futures, which are contracts on where the VIX will be on a future date.

UVXY seeks daily results that correspond to one and one-half times (1.5x) the daily performance of the S&P 500 VIX Short-Term Futures Index. That index holds first-month and second-month VIX futures with a weighted average of one month to expiration, and rolls positions from first-month into second-month contracts every day. The index has historically been highly correlated with the VIX but has tended to have relatively low beta to the VIX, so a 20% jump in the VIX usually moves the futures index by less.

The roll cost

In calm markets, futures for later months usually trade above the current VIX, a pattern called contango. A fund that keeps a one-month position has to sell the nearer contract and buy the later, pricier one every day. If the VIX stays put, each contract drifts down towards it as expiry approaches, and the fund loses that difference. Rolling VIX futures carries significant costs that can consistently reduce returns for funds that track these indexes.

Take a calm market where the VIX sits at 16 and the one-month future at 17, and the curve keeps that shape all year. The one-month position loses about 5.9% a month as the futures price converges on spot.

Example only. Assumes a VIX of 16, a one-month future at 17, an unchanged curve, 21 trading days a month, no fees and no change in spot volatility.

Actual fund returns point the same way. Over the year to 30 September 2026, VIXY returned −47.65% and UVXY −67.08% at NAV. Over three years, UVXY's NAV return was −65.12% a year, a cumulative loss of about 95.8%, and since its launch on 3 October 2011 it has returned −80.19% a year, which compounds to a loss of more than 99.99%.

When volatility spikes

The payoff comes in sudden sell-offs, when the VIX and its futures jump and the curve can flip so near-month futures trade above later ones. Say the VIX doubles from 16 to 32 in one session and the front future rises from 17 to 25.5, a gain of 50%. A 1.5x fund would gain about 75% that day. The gain fades quickly if volatility settles, because the VIX has tended to revert to a long-term average, and the roll cost resumes once the curve returns to contango.

UVXY's structure

UVXY is structured differently from most ETFs. Neither the fund nor ProShares Trust II is an investment company regulated under the Investment Company Act of 1940; the trust is a commodity pool, and the fund generates a Schedule K-1 tax form. The K-1 is US partnership tax paperwork that most ETFs do not issue. Investors in the fund could lose the full value of their investment over periods as short as one day.

SQQQ vs UVXY: which risk does each one target?

SQQQ and UVXY often appear together on lists of crash hedges, but they respond to different things.

Source: SQQQ summary prospectus, ProShares UVXY (as of 25 October 2026)

A slow, orderly decline in share prices can lift SQQQ while UVXY loses money, because volatility expectations may not rise much. A sharp, fearful drop tends to lift both.

What about SH, PSQ and SPXS?

Unleveraged inverse funds such as SH and PSQ aim for −1x the daily return. Over the year to 30 September 2026, SH returned −9.02% and PSQ −17.02% at NAV. They also reset daily and lose money in volatile sideways markets, though far less than −3x funds: about 6.1% in a flat year at 25% volatility, against 31.3% for SQQQ. For someone wanting to offset part of a portfolio for weeks, a −1x fund needs three times the capital of a −3x fund for the same exposure, and in exchange decays much less.

SPXS is the S&P 500 version of SQQQ, from a different issuer, with a gross and net expense ratio of 1.04%. The S&P 500 is broader than the Nasdaq-100, so SPXS reacts to the whole US large-cap market and SQQQ mainly to large technology-related companies.

When a hedge fails

Investors often buy SQQQ to protect a portfolio of US technology shares. Take a S$20,000 SQQQ position paired with a S$60,000 Nasdaq-100 holding, and run it through four market paths, ignoring fees and currency moves.

Example only. Assumes a −3x daily target, no fees, no financing costs and no change in the SGD/USD exchange rate.

The hedge does its job for a day. In a choppy month, it bleeds even though the holding barely moves. In a steady sell-off, compounding makes the −3x position grow faster than the holding shrinks, so the hedge overshoots; held through the recovery, that gain turns into a loss. A hedge sized correctly on Monday is the wrong size by Friday unless you rebalance it.

Net result of a S$60,000 Nasdaq-100 holding hedged with S$20,000 of SQQQ across four market paths

Other ways a hedge fails:

• Overnight gaps. US funds trade during US hours, which in Singapore fall from 9.30pm to 4am while US daylight saving time applies and 10.30pm to 5am after it ends in November. A stop-loss order cannot stop a gap at the open.
• The wrong benchmark. A Nasdaq-100 hedge on a portfolio of Singapore shares or global bonds protects against a different risk.
• Timing. VIX futures funds gain only when volatility rises faster than the futures curve already prices in, and lose steadily while you wait.
• Total loss. A −3x fund loses almost everything if its index rises about 33% in one day.

How to buy inverse ETFs from Singapore

You buy these funds through a brokerage account with US market access, after completing the W-8BEN form most brokers ask for. The guide to buying US ETFs from Singapore covers account opening, funding and FX step by step.

The extra step is the product review. Under MAS rules, a broker must conduct a Customer Account Review (CAR) before you open an account to trade listed SIPs. You pass if you meet at least one criterion:

• Relevant educational qualifications, or a professional finance-related qualification.
• At least 3 consecutive years of relevant working experience in the past 10 years.
• At least 6 transactions in listed SIPs in the last 3 years.
• Completing the free SGX Online Education Programme module and passing its assessment.

The CAR outcome expires after 3 years if you have transacted in a listed SIP only once or not at all in that time. Each broker runs its own review, so you take it again when you open an account elsewhere.

When you place the order, check the full fund name and the bid-ask spread, and use a limit order, because spreads tend to be wider near the US open and close.

Costs, taxes and fund structure

The expense ratio is only part of the cost. Inverse funds pay financing and trading costs on swaps and futures inside the fund, and volatility funds bear the roll cost. Holding SQQQ at a 0.94% expense ratio costs about US$94 a year on US$10,000 before any of those.

Singapore generally does not tax individuals on gains from selling shares and other financial instruments. Gains can be taxed as income when the activity amounts to trading, and frequent short-term use of these funds is where that question tends to arise.

On the US side, dividends paid to nonresident aliens face withholding at 30% unless a lower treaty rate applies. A non-US-citizen, nonresident estate must file Form 706-NA when US-situated assets exceed US$60,000 at death, and shares in US-domiciled funds such as SQQQ count towards that figure. UVXY and VIXY issue K-1s, so a tax adviser is worth consulting before holding them in size.

Alternatives to leveraged hedges

Most long-term investors manage downside risk through the shape of the portfolio itself. Holding a mix of equities, bonds and cash means a fall in one part is cushioned by the others, without a position that decays every day.

Other options include reducing equity exposure ahead of a planned expense, keeping an emergency fund in cash so you never have to sell in a downturn, and rebalancing on a schedule, which trims assets that have risen and adds to those that have fallen. For a short, specific view, a −1x fund held for days and sized small carries far less decay than a −3x fund or a VIX futures product.

Diversify your long-term portfolio with StashAway

The portfolio-level protection described above is what General Investing powered by StashAway does for you: a managed ETF portfolio spread across equities, bonds and other asset classes, matched to your risk level and free of daily resets or futures roll costs. You can fund it with cash or SRS, and the annual fee starts at 0.8% on the first S$25,000 and falls as your balance grows.

A diversified portfolio can still fall in value, so you could get back less than you invest.

Frequently asked questions

Short answers to the questions Singapore investors most often ask about inverse and volatility ETFs.

Is SQQQ a good hedge?

For a single day, SQQQ offsets a fall in the Nasdaq-100 fairly closely. Over longer periods, the daily reset makes it drift: it bleeds in choppy markets, can overshoot in a steady fall and loses heavily in a rally. Hedgers who use it usually rebalance often and keep the position small.

What is the difference between VIX and UVXY?

The VIX is an index of expected S&P 500 volatility over 30 days and cannot be bought directly. UVXY targets 1.5x the daily return of an index of first- and second-month VIX futures, which tends to move less than the VIX and loses value through the futures roll in calm markets.

Does UVXY decay?

Yes, and fast. UVXY returned −67.08% at NAV in the year to 30 September 2026 and −80.19% a year since its 2011 launch, mainly from rolling VIX futures in contango and the effect of daily 1.5x leverage.

Can I hold SQQQ long term?

You can, but the issuer designs it around a single day. In a rising or volatile market it loses value even when the index ends flat; at 25% volatility and a flat index, the prospectus estimates a loss of 31.3% over a year before fees.

Can Singapore retail investors buy inverse ETFs?

Yes, through a broker with US market access. Because brokers generally treat them as Specified Investment Products, you need to pass a Customer Account Review based on qualifications, work experience, past trades in listed SIPs or the free SGX education module.

What is the difference between SQQQ and PSQ?

Both move against the Nasdaq-100. PSQ targets −1x the daily return and SQQQ −3x, so SQQQ needs a third of the capital for the same exposure but suffers far more decay: about 31.3% in a flat year at 25% volatility, against roughly 6.1% for PSQ.