Volatility ETFs Are Down, but They Aren't Out of the Picture
The VIX, Wall Street’s favorite fear gauge, has been muted this year. Here's what investors need to know about volatility ETFs.
Despite plenty of scary headlines about trade wars and Chinese AI competition, stock market investors haven’t been that alarmed.
Wall Street’s favorite fear gauge, the Cboe Volatility Index, is having a ho-hum year after briefly surging at the tail end of 2024. Since the start of 2025, the index has averaged 16.7, with a high of 19.5 and a low of 14.9.
The calmness in the VIX reflects the lack of volatility in the S&P 500. Sure, there were down days in early January that took the index to a two-month low, but nothing that significantly altered the outlook for the economy and corporate earning—at least in the eyes of investors.
With volatility on the retreat, the $340 million Barclays iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX), which tracks VIX futures contracts, has fallen by more than 6% since the start of the year.
Eventually, volatility will return with a vengeance—it always does—but for now, investors can rest easy.
What Is the VIX?
It can be useful to keep an eye on the VIX to get a sense of how nervous investors are.
But the VIX doesn't measure actual, realized volatility. It measures what is known as implied volatility, which is calculated based on the price of near-term S&P 500 Index options, or those with 23 to 37 days until expiration.
When stocks gyrate wildly, options contracts—which allow investors to buy or sell at predetermined prices—tend to cost more.
Unfortunately, the VIX itself―also known as spot VIX―is un-investable: There's no way to buy or sell the popular gauge because the underlying portfolio of options that the index measures is constantly changing. However, there are financial products closely tied to movements in the index.
VIX vs. VXX
VIX futures contracts allow traders to bet on what value the index will be at some date in the future, and it’s through these contracts that VXX and other VIX ETFs get their exposure to the index.
VXX tracks the S&P 500 VIX Short-Term Futures Index, which, according to Barclays, “offers exposure to a daily rolling long position in the first and second month VIX futures contracts and reflects market participants’ views of the future direction of the VIX index at the time of expiration of the VIX futures contracts comprising the Index.”
Tip: For a full listing of these ETFs, check out etf.com’s Volatility ETFs page.
In addition to VXX, there are 11 other volatility ETFs listed in the U.S. The largest is the Simplify Volatility Premium ETF (SVOL), followed by the ProShares Ultra VIX Short-Term Futures ETF (UVXY).
UVXY tracks the same index as VXX but leverages its exposure by 1.5 times. On the other hand, SVOL is an active fund that attempts to generate income by betting against VIX futures contracts.
The ETF aims to provide –0.2x to –0.3x the daily performance of the S&P 500 VIX short-term futures index while using options to hedge against huge upside spikes in the index.
Tip: You can read more about these ETFs on their respective fund pages using this URL: www.etf.com/TICKER.
