That is because these funds are constantly replacing expiring futures contracts with new ones. When the new contracts are more expensive than the ones being sold (a situation called contango in the futures markets), the funds lose money on both ends of that transaction.

Contango is currently at about 8 percent, which means that investors buying a long VIX fund would need the VIX to rise more than 8 percent to hit a positive return.

In addition, the funds cost more than a typical stock or bond exchange-traded fund, with the VXX ETF, for example, charging 0.89 percent of assets per year in management fees.

"People have a higher fear of what's going to happen than what actually happens and therefore they're willing to pay for insurance," said Mike Venuto, chief investment officer at Toroso Investments. But he noted, "Volatility is not something that's sustainable."

 
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