With the CBOE Volatility Index (VIX) fluctuating around 30, a level that indicates moderately high market stress, investors are looking at a well-timed entry in volatility-targeting exchange-traded products.
Although the VIX continues to be elevated, recent indications from Washington indicate that the window may not remain open for very long.
Both President Donald Trump and Treasury Secretary Scott Bessent have teased out the possibility for rollback of tariffs and general de-escalation in trade—news that will reassure investor confidence and push VIX down.
In case of an eventual deceleration of volatility, tactical investors will need to invest in volatility ETFs, meaning now is also potentially the best time to take a holding position before equilibrium re-establishes.
Let us deconstruct three currently popular volatility ETFs amongst tactical investors:
iPath Series B S&P 500 VIX Short-Term Futures ETN (BATS:VXX)
- The VXX gives exposure to a rolling position in front-month VIX futures contracts. Its behavior tends to surge during sudden market shocks, and it is a favorite hedge among short-term traders.
- Best for: Quick-moving volatility spikes.
- Structure: Being an ETN, it has issuer credit risk, something long-term investors should note
- Expense Ratio: 0.89%.
ProShares VIX Short-Term Futures ETF (BATS:VIXY)
- VIXY provides comparable exposure to VXX, but in an ETF format. It offers a daily rolling position in short-term VIX futures and can take advantage of sudden spikes in volatility.
- Best for: Traders seeking transparent, ETF-based volatility exposure.
- Structure: ETF structure sidesteps credit risk of ETNs.
- Expense Ratio: 0.85%.
ProShares VIX Mid-Term Futures ETF (BATS:VIXM)
- For those who want to steer clear of the volatile swings of short-term VIX products, VIXM provides exposure to mid-term VIX futures, which mitigates the effects of near-term decay.
- Best for: More moderate exposure to volatility on a week-to-month basis.
- Structure: ETF structure with a less spiky volatility pattern.
- Expense Ratio: 0.85%
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Macroeconomic Backdrop Is Still Shaky
Today’s demand for volatility ETFs lies in the blend of economic doubt and policy-related risk. In its April 2025 World Economic Outlook, the International Monetary Fund heavily revised its growth estimate for the United States downward to 1.8% as it singled out Trump’s tariffs as being one of the heavy drags on productivity and investor sentiment.
Close to 0.4 percentage points of the downgrade are attributed to trade measures directly, and the remaining portion is a reflection of weakening domestic momentum. IMF Chief Economist Pierre-Olivier Gourinchas now estimates the U.S. recession probability at 40%, an increase from 25% in October.
These projections have managed to keep the high VIX levels intact—but political tone is potentially changing.
Trade Relief On The Horizon?
On April 22, President Trump and Treasury Secretary Bessent both hinted at relaxing tariffs, especially the 145% on Chinese imports. Bessent referred to the present trade policy as “unsustainable” and hinted at more clarity in the coming months.
Markets did not lose any time factoring in the possible relief:
SPDR S&P 500 ETF (NYSE:SPY) rose 2.6%, the Dow Jones ETF (NYSE:DIA) increased by 2.7%, and the Invesco QQQ Trust (NASDAQ:QQQ) rose 2.6%, on the same day.
These actions imply a willingness to turn away from protectionism, an event that would subdue the VIX and, by association, make volatility ETFs less attractive.
The Bottom Line
Volatility ETFs such as VXX, VIXY, and VIXM work best as short-term instruments, not long-term holdings. Yet with the VIX still in elevated mode and policy clarity still on the drawing board, now might be the perfect time to get in on the action—before the market discovers its cool and these high-octane vehicles lose their sizzle.
In short: this may be your last bet before the volatility train leaves the station.
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