Volatility has surged to the highest levels since 2008 as a result of the coronavirus pandemic and its dramatic impact on world economies. Investors can profit from these wild market swings through volatility ETFs linked to the Chicago Board Options Exchange Market Volatility Index (VIX). VIX is a real-time index that represents the market's expectation of 30-day forward-looking volatility, as viewed through S&P 500 index options. It provides a measure of market risk and investor sentiment, and is popularly known as the "fear index".

VIX ETFs give sophisticated investors the ability to build high-risk equity positions based on how VIX futures contracts will trade. The price of these funds will rise and fall in tandem with volatility but at different rates, based on their construction. Short sales can also be taken, in which price will rise when volatility falls and fall when volatility rises.These ETFs are made to be held over relatively short periods to take advantage of changes in volatility, not long-term buy-and-hold investing.

Here are the best VIX ETFs in three categories, based on one-year total return through March 18, 2020 for the first two categories, and liquidity for the last. ETFs with a 3-month average trading volume below 10,000 were excluded for having insufficient liquidity.

Best Short-term VIX ETF:

ProShares VIX Short-Term Futures ETF (VIXY)

  • 1-Year Trailing Total Return: 137.0%
  • Expense Ratio: 0.87%
  • 3-Month Average Daily Volume: 5.9 M
  • Assets Under Management: $426.7 M
  • Inception Date: January 3, 2011
  • Issuer: ProShares

This ETF tracks an index comprised of short-term VIX futures contracts. Returns will follow the slope of the futures curve, which fluctuates according market expectations for higher or lower prices over contracts with different expiration dates. This instrument has a daily reset feature that will compound positive and negative returns when held for more than one trading session.

Best Medium Term VIX ETF:

ProShares VIX Mid-Term Futures ETF (VIXM)

  • 1-Year Trailing Total Return 118.38%
  • Expense Ratio: 0.87%
  • 3-Month Average Daily Volume: 105,558
  • Assets Under Management: $49.7 M
  • Inception Date: January 3, 2011
  • Issuer: ProShares

This ETF tracks an index of VIX contracts that are longer dated than the ones held by VIXY. The longer dated contracts will be less subject to contango losses in return, but may correlate less with the VIX's spot value.

Best VIX ETF For Active Investors:

iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX)

  • 1-Year Trailing Total Return: 139.2%
  • Expense Ratio: 0.89%
  • 3-Month Average Daily Volume: 59.6 M
  • Assets Under Management: $2.2 B
  • Inception Date: January 17, 2018
  • Issuer: Barclays Capital

This Exchange-Traded Note (ETN) tracks an index comprised of short-term VIX futures contracts. The fund is highly-liquid, with more than $2 billion under management, making it a sound choice for active investors. Returns will follow the slope of the futures curve, which fluctuates according market expectations for higher or lower prices over contracts with different expiration dates. This instrument has a daily reset feature that will compound positive and negative returns when held for more than one session.