When it comes to measuring equity market volatility and investors' pensiveness toward stocks, the CBOE Volatility Index, also known as the VIX or "fear index," is widely followed. Issuers of exchange-traded products (ETPs) capitalized on that theme, and there are now 22 VIX-related ETPs on the market. Some long VIX ETPs rose to prominence during the global financial crisis, but the flaws in these products have been exposed in a big way during the current U.S. bull market.

Now one of the longest bull markets on record, the post-financial crisis rebound in U.S. stocks has been punishing for long VIX ETPs. Conversely, traders that have shorted volatility over the past several years have usually been rewarded. "A dollar invested in December 2010 in a VIX exchange-traded product that bet against market volatility would be worth $9.38 as of this writing," according to Morningstar research. "This phenomenal return can be attributed to the stock market climbing steadily higher with lower volatility than expected." (See also: Strategies to Trade Volatility Effectively With VIX.)

The iPath S&P 500 VIX Short-Term Futures ETN (VXX) is one of the most popular VIX ETPs. VXX has $1.1 billion in assets under management, or about 20% of all assets allocated to VIX ETPs, but VXX has been the victim of bad timing, debuting just weeks before the current bull market commenced. Over the past three years, VXX has lost 91%.

The iPath S&P 500 VIX Mid-Term Futures ETN (VXZ), a $41.1 million ETN, has plunged 57.5% over the past three years. As are VXX and VXZ, most VIX products are structured as exchange-traded notes (ETNs). ETNs are unsecured, unsubordinated debt instruments issued by banks. Another key difference between exchange-traded funds (ETFs) and ETNs is that, because ETNs are debt instruments, the value of these products can be affected by the issuing bank's credit rating. (See also: ETF or ETN? What's The Difference?)

Like leveraged ETFs, holding long VIX ETNs for extended time frames can result in disaster and disappointment. "Holding a long position in a short-term VIX ETP has been a losing bet over the long haul," said Morningstar. "From Nov. 1, 2006, through Sept. 15, 2017, VXX has posted an annualized return of negative 70.3%. This is largely attributable to the VIX futures term structure and VIX ETPs' daily reset." Additionally, VIX ETNs usually feature high expense ratios, which further diminish the long-term allure of these products.

One more important point: VIX ETNs do not track the spot VIX. Rather, a product like VXX reflects market participants' expectations for volatility going forward, not at the moment. Due to the inability of VIX ETNs to effectively track the spot VIX, investors using these products are beholden to the ever-changing volatility expectations held by other market participants. (See also: Tracking Volatility: How the VIX Is Calculated.)