The CBOE Volatility Index, Wall Street’s fear gauge, has rallied 35% from its multiyear low recorded earlier this month. However, the largest volatility exchange traded product indexed to VIX futures has only bounced 8% from the August low.

The performance disparity is another reminder that investors shouldn’t expect volatility-linked ETFs to track the VIX spot price.

The VIX climbed nearly 6% in Thursday’s early stock sell-off to above 18. The index hit an intraday low of 13.30 on Aug. 17.

The iPath S&P 500 VIX Short Term Futures ETN (NYSEArca: VXX) is up about 8% from its recent low, which was set on Aug. 21 at $11.02 a share. VXX gained 2% in morning trade Thursday.

Volatility exchange traded products have been popular in 2012 as a hedge.

Other products in the category include ProShares Ultra VIX Short-Term Futures ETF (NYSEArca: UVXY) and VelocityShares Daily 2X VIX Short Term ETN (NYSEArca: TVIX). Unlike VXX, they are leveraged. UVXY plans to reverse split next month following a step decline. [VIX-Futures ETF to Reverse Split]

It is impossible to invest in the spot VIX, so these products are designed to follow VIX futures contracts.

The products are programmed to “roll” the contracts over periodically to maintain exposure to VIX futures. They can lose money on this trade when longer-dated contracts are more expensive than the front-month contract, or when markets are said to be in “contango.”

“The VIX futures curve is at the steepest level since before the financial crisis began, with each progressing month at a higher and higher level with longer term volatility at a much higher premium than short-term volatility,” CNBC reported recently.

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