ProShares Trust II Navigates Volatile Markets, Adjusts Expense Ratios

TL;DR

**UCO's expense ratio tweaks and reliance on swaps mean investors need to scrutinize underlying risks, as market volatility could significantly impact returns.**

AI Summary

ProShares Trust II (UCO) reported its 10-Q for the period ended June 30, 2025, detailing its financial condition and operations. The filing indicates that the fund's net asset value fluctuates due to the timing of creation and redemption units. The expense ratio, excluding brokerage commissions and futures account fees, was 0.95% for some periods and 0.85% for others, reflecting a slight decrease in certain operational costs. The fund's investments include U.S. Government Agencies Short-term Debt Securities, with specific allocations to ProShares Ultra Gold, ProShares Ultra VIX Short-Term Futures ETF, and ProShares Ultra Silver as of June 30, 2025. The report highlights the use of total return swap agreements, with payment due at termination/maturity, and notes that a positive amount represents 'long' exposure to the benchmark index. The fund continually evaluates and may change counterparties for its transactions, with new counterparties potentially added at any time. Market values are determined at the close of the applicable primary listing exchange, which may differ from the NAV calculation time. The filing also mentions that all or partial amounts are pledged as collateral for swap agreements.

Why It Matters

This filing offers a crucial look into ProShares Trust II's operational efficiency and investment strategy, particularly its reliance on futures and swap agreements to achieve its investment objectives. For investors, understanding the expense ratios, which range from 0.85% to 0.95% excluding certain fees, is vital for assessing long-term returns. The fund's ability to manage counterparty risk and collateral for swap agreements directly impacts its stability and competitive positioning against other commodity-linked ETFs. Employees and customers benefit from a transparent view of the fund's financial health, while the broader market gains insight into trends in commodity and volatility-linked investment products.

Risk Assessment

Risk Level: medium — The risk level is medium due to the fund's significant use of total return swap agreements and futures contracts, which inherently carry counterparty risk and market volatility risk. The filing explicitly states that 'all or partial amount pledged as collateral for swap agreements,' indicating exposure to potential collateral calls and counterparty default. Additionally, the 'fluctuating net asset value during the period because of timing of creation and redemption units' introduces liquidity and pricing risks.

Analyst Insight

Investors should carefully review the fund's specific holdings in U.S. Government Agencies Short-term Debt Securities and its counterparties for swap agreements. Given the reliance on derivatives, investors should assess their own risk tolerance for instruments exposed to significant market fluctuations and counterparty risk before investing in UCO.

Financial Highlights

total Assets

Not Disclosed

total Debt

Not Disclosed

Key Numbers

• 0.95% — expense ratio (expense ratio excluding brokerage commissions and futures account fees for certain periods)
• 0.85% — expense ratio (expense ratio excluding brokerage commissions and futures account fees for other periods)
• June 30, 2025 — reporting period end date (date for which the financial condition is reported)

Key Players & Entities

• ProShares Trust II (company) — filer of the 10-Q
• UCO (company) — ticker symbol for ProShares Trust II
• ProShares Ultra Gold (company) — investment holding as of June 30, 2025
• ProShares Ultra VIX Short-Term Futures ETF (company) — investment holding as of June 30, 2025
• ProShares Ultra Silver (company) — investment holding as of June 30, 2025
• SEC (regulator) — regulator of 10-Q filings

FAQ

Risk Factors

• Counterparty Risk [medium — operational]: The fund engages in transactions with various counterparties, who are subject to change at any time. This introduces a risk that a counterparty may default on its obligations, potentially impacting the fund's performance and ability to meet its investment objectives.
• Market Value Fluctuation [medium — market]: Market values of investments are determined at the close of the primary listing exchange, which may differ from the Net Asset Value (NAV) calculation time. This timing difference can lead to discrepancies between the trading price of shares and their underlying value.
• Collateral Pledging [medium — financial]: All or partial amounts of the fund's assets are pledged as collateral for swap agreements. This means these assets are not freely available and could be lost if the fund defaults on its swap obligations.
• Creation/Redemption Unit Timing [low — operational]: The fluctuation in the fund's net asset value is influenced by the timing of creation and redemption units. This dynamic can lead to a divergence between the aggregate gains/losses and the change in shares outstanding.

Industry Context

ProShares Trust II operates within the exchange-traded fund (ETF) industry, which is characterized by increasing competition and a demand for specialized investment products. Funds like UCO, which offer leveraged exposure to commodities or volatility, cater to sophisticated investors seeking specific market outcomes. The industry is also subject to evolving regulatory scrutiny regarding product complexity and investor protection.

Regulatory Implications

The use of derivative instruments like total return swaps subjects ProShares Trust II to regulatory oversight concerning counterparty risk and collateral management. Compliance with disclosure requirements for these complex instruments is crucial. Changes in regulations related to derivatives or leveraged ETFs could impact the fund's structure, operations, or ability to offer its products.

What Investors Should Do

1. Review Counterparty Agreements
2. Monitor Expense Ratios
3. Understand NAV vs. Market Price

Key Dates

• 2025-06-30: Reporting Period End Date — Marks the end of the period for which the financial condition and results of operations are reported in this 10-Q filing.
• 2025-08-08: Filing Date — The date on which the 10-Q report was officially filed with the SEC.

Glossary

Creation/Redemption Units

The mechanism by which ProShares Trust II creates or redeems large blocks of its shares, typically used by institutional investors to enter or exit the fund. (The timing of these units directly impacts the fund's Net Asset Value (NAV) and the number of shares outstanding.)

Total Return Swap Agreements

A derivative contract where one party agrees to pay the total return of an underlying asset (like an index) in exchange for a fixed or floating rate payment from the other party. (Used by the fund to gain exposure to benchmark indices; a positive amount indicates 'long' exposure.)

Net Asset Value (NAV)

The per-share market value of a fund, calculated by taking the total value of its assets, subtracting liabilities, and dividing by the number of outstanding shares. (The NAV is a key metric for investors to understand the underlying value of their investment, and it can fluctuate independently of market trading prices.)

Collateral

Assets pledged by a borrower to a lender to secure a loan or other obligation. If the borrower defaults, the lender can seize the collateral. (A portion of the fund's assets are pledged as collateral for swap agreements, indicating a potential risk if swap obligations are not met.)

Expense Ratio

The annual fee expressed as a percentage of a fund's average net assets that covers operating expenses. (The filing notes specific expense ratios (0.95% and 0.85%) excluding certain fees, providing insight into the fund's operational cost efficiency.)

Year-Over-Year Comparison

This 10-Q filing for the period ended June 30, 2025, provides updated details on ProShares Trust II's financial condition and operations. While specific comparative financial metrics like revenue growth, margin changes, or net income are not detailed in the provided text for a direct comparison to the prior year's filing, the report emphasizes the ongoing use of total return swaps and the dynamic nature of counterparty relationships. The expense ratio information indicates a slight variation, with figures of 0.95% and 0.85% noted when excluding brokerage commissions and futures account fees, suggesting potential minor shifts in operational cost management.

Key Financial Figures

• $0 — had 147,173,328 shares of common stock, $0 par value per share, outstanding. Tab

Filing Documents

• d847696d10q.htm (10-Q) — 6449KB
• d847696dex311.htm (EX-31.1) — 11KB
• d847696dex312.htm (EX-31.2) — 11KB
• d847696dex321.htm (EX-32.1) — 4KB
• d847696dex322.htm (EX-32.2) — 4KB
• 0001193125-25-176892.txt ( ) — 17437KB
• agq-20250630.xsd (EX-101.SCH) — 1156KB
• d847696d10q_htm.xml (XML) — 4458KB

FINANCIAL INFORMATION

Part I. FINANCIAL INFORMATION Item1. Financial Statements (unaudited). F-1 Item2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 127 Item3. Quantitative and Qualitative Disclosures About Market Risk. 175 Item4. Controls and Procedures. 188

OTHER INFORMATION

Part II. OTHER INFORMATION Item1. Legal Proceedings. 190 Item1A. Risk Factors. 190 Item2. Unregistered Sales of Equity Securities and Use of Proceeds. 190 Item3. Defaults Upon Senior Securities. 192 Item4. Mine Safety Disclosures. 192 Item5. Other Information. 192 Item6. Exhibits. 193 Table of Contents

FINANCIAL INFORMATION

Part I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements. Index Documents Page ProShares Short VIX Short-Term Futures ETF F-2 ProShares Ultra Bloomberg Crude Oil F-8 ProShares Ultra Bloomberg Natural Gas F-12 ProShares Ultra Euro F-18 ProShares Ultra Gold F-23 ProShares Ultra Silver F-27 ProShares Ultra VIX Short-Term Futures ETF F-33 ProShares Ultra Yen F-38 ProShares UltraShort Bloomberg Crude Oil F-42 ProShares UltraShort Bloomberg Natural Gas F-47 ProShares UltraShort Euro F-52 ProShares UltraShort Gold F-57 ProShares UltraShort Silver F-62 ProShares UltraShort Yen F-67 ProShares VIX Mid-Term Futures ETF F-72 ProShares VIX Short-Term Futures ETF F-77 ProShares Trust II F-82

Notes to Financial Statements

Notes to Financial Statements F-86 F-1 Table of Contents PROSHARES SHORT VIX SHORT-TERM FUTURES ETF June 30, 2025 (unaudited) December 31, 2024 Assets Short-term U.S. government and agency obligations (Note 3) (cost $ – and $ 24,931,067 , respectively) $ — $ 24,937,875 Cash 178,250,108 160,200,226 Segregated cash balances with brokers for futures contracts 99,379,314 80,953,814 Receivable on open futures contracts 1,872,187 806,556 Interest receivable 655,920 438,452 Total assets 280,157,529 267,336,923 Liabilities and shareholders' equity Liabilities Payable on open futures contracts — 1,011,830 Brokerage commissions and futures account fees payable 4,584 6,902 Payable to Sponsor 227,545 227,958 Total liabilities 232,129 1,246,690 Commitments and Contingencies (Note 2) Shareholders' equity Shareholders' equity 279,925,400 266,090,233 Total liabilities and shareholders' equity $ 280,157,529 $ 267,336,923 Shares outstanding 6,568,614 5,318,614 Net asset value per share $ 42.62 $ 50.03 Market value per share (Note 2) $ 42.60 $ 50.06 See accompanying notes to financial statements. F-2 Table of Contents PROSHARES SHORT VIX SHORT-TERM FUTURES ETF SCHEDULE OF INVESTMENTS JUNE 30, 2025 (unaudited) Futures Contracts Sold Number of Contracts Notional Amount at Value Unrealized Appreciation (Depreciation)/Value VIX Futures - Cboe, expires July 2025 4,021 $ 75,242,963 $ 8,535,463 VIX Futures - Cboe, expires August 2025 3,232 64,955,443 1,856,879 $ 10,392,342 See accompanying notes to financial statements. F-3 Table of Contents PROSHARES SHORT VIX SHORT-TERM FUTURES ETF (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Investment Income Interest $ 3,664,726 $ 3,457,223 $ 5,820,643 $ 6,766,508 Expenses Management fee 973

View Full Filing

View this 10-Q filing on SEC EDGAR