Volatility ETFs Seem Perfect for the Current Moment; Have They Performed?

Volatility, volatility, volatility – markets have seen plenty of turmoil this year, and not just because of fears about AI. Attacks on Venezuela, the U.S.-Israel-Iran war, and even more potential conflicts have all created major volatility. The Chicago Board Options Exchange’s CBOE Volatility Index, otherwise known as the VIX, is a popular metric for measuring market volatility. It spiked to as high as 31 in late Marchm having started 2026 at 14.5. Now, it sits at 16.95. So how have volatility ETFs actually performed?

First, it’s worth asking what role volatility ETFs should play. Some, of course, look to provide portfolio returns, but others offer income to portfolios. Meanwhile, others are meant to be short term, tactical tools are used on a daily or even hour-to-hour basis. Those can be intended to offset brief spikes in volatility. For the most part, however, they are tactical strategies for market periods like the one that started this year.

ZVOL, the Simplify Volatility Premium ETF, provides an important example. It has seen negative returns on a YTD basis, according to ETF Database data. Its performance has been spotty, but at the same time, according to Volatility Shares, it has provided an annual 70.56% distribution rate. At the same time, over the last month, it has also started to provide positive returns, outperforming the ETF Database Inverse Volatility ETF Category in that time.

Other funds provide interesting strategies that look to offset VIX spiking and market chaos. The ProShares VIX Short-Term Futures ETF (VIXY) does just that and has been a top-two ETF in the ETF Database Inverse Volatility Category YTD. Linked to an index of VIX futures, with performance tied deeply to the VIX, it has returned 10.3% YTD. That’s true despite disappointing performance over the last year, suggesting that it has delivered during this high volatility period.

Those both provide pretty clear answers that volatility ETFs have delivered in large part on what they’re supposed to do. They can offer income in times of volatility as ZVOL does, and also provide returns offsetting VIX increases and market turmoil like VIXY does. 

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Perhaps more important, however, is appropriate investor use of the funds. Given that many such ETFs have a relationship to an already technical index, volatility ETFs can be delicate tools. However, they can really stand out. 

Over the last five years, according to ETF Database data, the ProShares Ultra VIX Short-Term Futures ETF (UVXY) has gathered the greatest amount of flows in the volatility ETF category. The fund has pulled in around $2.3 billion in net inflows in that time frame. The strategy’s leverage resets on a daily basis. 

Overall, then, it appears that volatility ETFs remain an important set of options in the ETF landscape. While there are other income strategies out there, few relate directly to the VIX. At the same time, their ability to provide inverse performance, too, can make them appealing medium term tools. 

Originally published on Advisor Perspectives

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