Volatility ETF Overview

Volatility ETFs are popular trading products. These products are linked to volatility futures. They own or short futures based on the CBOE Volatility Index (VIX). The VIX index portrays the price volatility embedded in the option prices of the S&P 500 Index for the next 30 days.

Investors need to understand that these funds track the futures on the VIX, not VIX itself. Because of the nature of the VIX futures markets, the rolling cost of futures may be detrimental to performance results. Thus, these products may lose money over the long term. Investors need to approach these products with care.

With 15 ETFs traded in the U.S. markets, Volatility ETFs gather total assets under management of $3.02B. The average expense ratio is 1.28%. Volatility ETFs can be found in the following asset classes:

  • Alternatives

The largest Volatility ETF is the iPath S&P 500 VIX Short-Term Futures ETN VXX with $967.75M in assets. In the last trailing year, the best performing Volatility ETF was the ZIV at 9.80%. The most-recent ETF launched in the Volatility space was the iPath Series B S&P 500 VIX Short Term Futures ETN VXXB in 01/17/18.

Volatility UNIVERSITY

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