NEW YORK (TheStreet) -- Whenever market volatility spikes, investors are likely to start hearing about the VIX, also known as the "fear index." The VIX is a widely followed measure of options volatility on the S&P 500, and over the years approximately 15 exchange-traded funds designed as plays on the VIX have come to market.
Two of the newest VIX ETFs debuted Tuesday, offering prospective investors potentially more efficient avenues for profiting from changes in volatility. Let's have a look at these new products to if they are suitable for average investors.
AccuShares Investment Management launched the AccuShares Spot CBOE VIX Up Shares (VXUP) and AccuShares Spot CBOE VIX Down Shares (VXDN), both of which are designed to mirror the "spot," or actual market price, of the VIX. Investors who want to bet that volatility is set to rise would choose the VIX Up Shares ETF. Vix Down Shares is designed to reflect the inverse performance of spot VIX prices, meaning it's for those investors wanting to wager on a drop in volatility.
The new VIX products, the first linked to the spot CBOE VIX, have an advantage over their more established rivals. Those older VIX ETFs are futures-based, which exposes investors to issues when rolling contracts in the futures market.
The previously available VIX products have to sell futures contracts that are closest to maturity and then buy later-dated contracts. Think about that strategy this way: As a futures contract gets closer to expiration it loses value, meaning the longer-dated contracts are worth more, so by selling the expiring contract to buy a longer-dated equivalent, futures-based VIX products essentially sell low and buy high.