By Lawrence G. McMillan
Volatility products like VXX remain among the most misunderstood trading vehicles, and many of the misconceptions that existed when this article was first published still persist today. Although the piece below dates back to 2010, the underlying mechanics of futures rolls, contango, backwardation, and the performance drag built into volatility ETPs are just as relevant for today's traders. If you've ever wondered why VXX can behave so differently from the VIX itself, this classic explanation from is well worth revisiting.
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