The VIX recently touched down to 10.3 in July, its lowest level in seven years, reflecting an increasingly complacent market conditions.
Investors should be aware that VIX-related ETFs are designed to track CBOE Volatility Index futures contracts, not the VIX spot price. It’s a very important difference. [Father of the VIX Issues Warning on Volatility ETFs]
Volatility products “roll” the contracts over periodically to maintain exposure to VIX futures. Consequently, 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.”
ProShares VIX Short-Term Futures ETF
For more information on the CBOE Volatility Index, visit our VIX category.
Correction: VXX & VIXY Thursday performance.