Company: SVIX
Filing Date: 2025-08-13
Form Type: 10-Q
Source: 0001213900-25-075845
Chunk: 343

Company: VS Trust
Filing Date: 2025-08-13
Form: 10-Q
Item: Part II, Item 8
Chunk 343
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 to the treatment of customer segregated funds, under which the clearing house may access all of the
commingled customer segregated funds of a defaulting clearing broker. Derivatives entered into directly between two counterparties do
not necessarily benefit from such protections, particularly if entered into with an entity that is not registered as a “swap dealer”
with the CFTC. This exposes the Funds to the risk that a counterparty will not settle a transaction in accordance with its terms and conditions
because of a dispute over the terms of the contract (whether or not bona fide) or because of a credit or liquidity problem, thus causing
the Funds to suffer a loss.

The Sponsor regularly reviews the performance of
its counterparties for, among other things, creditworthiness and execution quality. In addition, the Sponsor periodically considers the
addition of new counterparties and the counterparties used by a Fund may change at any time. Each day, the Funds disclose their portfolio
holdings as of the prior Business Day. Each Fund’s portfolio holdings identifies its counterparties, as applicable. This portfolio
holdings information may be accessed through the web on the Sponsor’s website at www.volatilityshares.com.

Each counterparty and/or any of its affiliates
may be an Authorized Participant or shareholder of a Fund, subject to applicable law.

The counterparty risk for cleared derivatives transactions
is generally lower than for OTC derivatives. Once a transaction is cleared, the clearing organization is substituted and is a Fund’s
counterparty on the derivative. The clearing organization guarantees the performance of the other side of the derivative. Nevertheless,
some risk remains, as there is no assurance that the clearing organization, or its members, will satisfy its obligations to a Fund.

F-32

Leverage Risk

The Funds may utilize leverage in seeking to achieve
their respective investment objectives and will lose more money in market environments adverse to their respective daily investment objectives
than funds that do not employ leverage. The use of leveraged and/or inverse leveraged positions increases the risk of total loss of an
investor’s investment, even over periods as short as a single day.

For example, because UVIX includes a two times
(2x) multiplier, a single-day movement in the relevant benchmark approaching 50% at any point in the day could result in the total loss
or almost total loss of an investor’s investment if that movement is contrary to the investment objective of the Fund in which an
investor has invested, even if such Fund’s benchmark