VIX ETFs Capitalize on Increased Market Concerns

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.