Just to summarize:
The spot/forward relationship between VIX and VIX futures has two noteworthy consequences:
(a) The price of a VIX futures contract can be lower, equal to or higher than VIX, depending on whether the market expects volatility to be lower, equal to or higher in the 30-day forward period covered by the VIX futures contract than in the 30-day spot period covered by VIX
(b) There is no cost-of-carry relationship between the price of VIX futures and VIX. This is simply because there is no "carry" arbitrage between VIX futures and VIX as there is between a stock index futures and the underlying index. VIX is a volatility forecast, not an asset. Hence you cannot create a position equivalent to one in VIX futures by buying VIX and holding the position to the futures expiration date while financing the transaction.
AND from the link suggested to me as knowledge:
Investors considering these ETFs and ETNs should realize that they are not great proxies for the performance of the spot VIX. In fact, studying recent periods of volatility in the S&P 500 SPDR (ARCA:SPY) and the changes in the spot VIX, the one-month ETN proxies captured about one-quarter to one-half of the daily VIX moves, while the mid-term products did even worse. The TVIX, with its two-times leverage, did better (matching about half to three-quarters of the performance), but consistently provided less than fully two-times the performance of the regular one-month instrument. Moreover, because of the negative roll and volatility lag in that ETN, holding on too long after the periods of volatility started to significantly erode returns.
The Bottom Line
If investors really want to place bets on equity market volatility or use them as hedges, the VIX-related ETF and ETN products are acceptable but highly-flawed instruments. They certainly have a strong convenience aspect to them, as they trade like any other stock.
The spot/forward relationship between VIX and VIX futures has two noteworthy consequences:
(a) The price of a VIX futures contract can be lower, equal to or higher than VIX, depending on whether the market expects volatility to be lower, equal to or higher in the 30-day forward period covered by the VIX futures contract than in the 30-day spot period covered by VIX
(b) There is no cost-of-carry relationship between the price of VIX futures and VIX. This is simply because there is no "carry" arbitrage between VIX futures and VIX as there is between a stock index futures and the underlying index. VIX is a volatility forecast, not an asset. Hence you cannot create a position equivalent to one in VIX futures by buying VIX and holding the position to the futures expiration date while financing the transaction.
AND from the link suggested to me as knowledge:
Investors considering these ETFs and ETNs should realize that they are not great proxies for the performance of the spot VIX. In fact, studying recent periods of volatility in the S&P 500 SPDR (ARCA:SPY) and the changes in the spot VIX, the one-month ETN proxies captured about one-quarter to one-half of the daily VIX moves, while the mid-term products did even worse. The TVIX, with its two-times leverage, did better (matching about half to three-quarters of the performance), but consistently provided less than fully two-times the performance of the regular one-month instrument. Moreover, because of the negative roll and volatility lag in that ETN, holding on too long after the periods of volatility started to significantly erode returns.
The Bottom Line
If investors really want to place bets on equity market volatility or use them as hedges, the VIX-related ETF and ETN products are acceptable but highly-flawed instruments. They certainly have a strong convenience aspect to them, as they trade like any other stock.
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