VIXY holds a rolling position in first and second-month VIX futures, tracking the S&P 500 VIX Short-Term Futures Index. It gains when market volatility rises sharply, as in March 2020, but it does not track the VIX index itself. VIX futures usually trade at a premium to spot VIX, a condition known as contango. Rolling positions forward each month at higher prices creates a steady drag on returns in calm markets. As a result, VIXY has lost most of its value over multi-year periods, and it is not suited to long-term holding. It is used by traders for short-term positions around expected volatility events and requires an understanding of how the VIX futures curve works.
