I think this discussion has run off course a bit.
My original point takes into consideration that this etf is supposed to track vix short-term futures, rather than the spot VIX. And that it seems to be straying from even what one should expect were it dealing with a vicious contango situation.
The point, were it to be working as well as could be imagined, would not be a proxy for a more effective SH.
VIX does not necessarily rise as stocks go down. It rises as insurance is bought for core holdings. So it rises as emotional or panicky selling takes hold, rather than straightforward distribution.
At this point, as a hedge when you think funds are still holding or buying, it does not seem to be accomplishing its goal.
Even if you take into consideration the contango and the daily rollover, it is lagging by an unreasonable amount precisely when it should be making up ground.
Unless someone has an argument that takes all of these points into consideration and offers a reasonable argument (like for example, how a little contango could result in lagging by 10-15% per day on key days), then I think this is simply a flawed instrument, that must prove itself in action, and that maybe, just maybe, there's more going here.
