VIX - Trading Volatility

Derived from options prices on the S&P500, VIX® – the CBOE Volatility Index® – is an indicator of short-term market outlook, spiking in times of market uncertainty

The index itself cannot be traded but CBOE has introduced futures reflecting the market’s estimate of the VIX® Index on various expiration dates into the future

VIX ETFs track these futures, which actually puts the funds two steps away from market volatility, relying on futures to estimate the index which is itself derived from option pricing

Also, because the futures will decay over time, as they approach maturity, the roll-over of the funds into the next futures contracts represent a cost to the funds invested in them

This is why the VIX ETFs and ETNs are not investment vehicles but indicators of market sentiment over the shortest possible term, which may be used as tactical hedge of a portfolio for a few days. ETFs invested in Mid-Term Futures add another level of uncertainty

As benchmark to track potential trend reversal, a 1.5 inverse ETF, ProShares Short VIX Short-Term Futures , provides short exposure to the S&P 500 VIX Short-Term Futures Index; the strategy profits from decreases in the expected volatility of the S&P 500 

By controlling for performance of the ETFs and ETNs of the selection over short time frames, shifts in market anticipations will be highlighted

Check performance and volatility from 2 weeks to 1 month - on tab at top right of your screen