VIX products are attracting increased interest after the equities market rallied over 10% from their February lows. As some see the recent rebound grow long in the tooth, traders are beginning to position against the next downward turn.
The VIX is a widely observed indicator for investor sentiment in the stock market and measures the expected or implied volatility of large-cap stock options traded on the S&P 500 index. Exchange traded products that track VIX futures allow investors to profit during rising volatility or hedge against short-term turns.
The VIX, though, plunged 9.1% to 13.85 Wednesday after Federal Reserve Chair Janet Yellen reiterated the central bank’s dovish stance in light of ongoing volatility in the global economy.
Investors should keep in mind that the majority of VIX ETPs are designed to track CBOE Volatility Index futures contracts, not the VIX spot price. It’s a very important difference.
iPath S&P 500 VIX Short Term Futures ETN