The simplest product (at least from an understanding point of view) would be VIX futures. These are futures which are (to a first approximation) cash settled to the VIX Index. (You can view the specs here).
One thing to notice is that they expire. This means that if you buy a future to gain exposure, when it expires you lose your exposure. (The same is true options—when they expire, you lose your optionality. (Actually, you lose some optionality on a daily basis which is par of why you can’t own / replicate the VIX Index)). This means you have to come up with a strategy to “roll” your exposure before it expires. You can have a look at the term structure of VIX futures here.
Another thing to notice is that VIX futures are the expected value of the index—NOT the index. Typically when vol explodes, the VIX Index goes very high, the front future goes high, the next future less high and so on… Depending on which futures you own, you will make money, but not as much as the index will have moved.
Typically retail investors tend to trade the VIX via ETFs. These tend to formalise a strategy of buying and rolling VIX futures. Generally you can find the details in the ETF docs.
The simplest product (at least from an understanding point of view) would be VIX futures. These are futures which are (to a first approximation) cash settled to the VIX Index. (You can view the specs here).
One thing to notice is that they expire. This means that if you buy a future to gain exposure, when it expires you lose your exposure. (The same is true options—when they expire, you lose your optionality. (Actually, you lose some optionality on a daily basis which is par of why you can’t own / replicate the VIX Index)). This means you have to come up with a strategy to “roll” your exposure before it expires. You can have a look at the term structure of VIX futures here.
Another thing to notice is that VIX futures are the expected value of the index—NOT the index. Typically when vol explodes, the VIX Index goes very high, the front future goes high, the next future less high and so on… Depending on which futures you own, you will make money, but not as much as the index will have moved.
Typically retail investors tend to trade the VIX via ETFs. These tend to formalise a strategy of buying and rolling VIX futures. Generally you can find the details in the ETF docs.
Thank you. That confirms my understanding of the ETF.