Extreme volatility. There’s an ETF for that, right?

Recent equity market swings have been exhilarating for the high-frequency traders who rushed home from August vacations to cash in. For the rest of us, the feeling is a bit closer to having just stepped off the amusement park ride wondering if your corn dog lunch might suddenly reappear.

But wait, isn’t there a slew of ETFs that track volatility so main street investors can cash in too? Yes. The largest of these is the iPath S&P 500 VIX Short-Term Futures ETN (NYSEArca: VXX). It boasts over $1.148 billion in assets as of Aug. 17.

Did investors in VXX fare well over the most volatile days? Depending on where you measure it, probably yes. Let’s grant you perfect clairvoyance and say you bought VXX on Friday afternoon, Aug. 5, just before the news broke about the S&P downgrade of U.S. Treasurys. Let’s further assume that your exit strategy was to sell VXX as soon as the broad-market broke even. That means you would have got out on Monday, Aug. 13.

Bully for you. Your return would have been 6.17 percent for the six-day period, according to Bloomberg.

This graph shows that products like VXX can work in the short term, assuming you have the skill or luck to get the timing right.

But the short term is the only way to use these funds in my view. There are two main reasons for this.

First, VXX does a lousy job delivering the returns of the VIX itself, the CBOE Volatility Index. Simply put, the VIX index is not investable. VXX and similar products do the best they can to match the VIX index using derivatives—specifically, futures on the VIX. But the year-to-date results aren’t pretty.

That’s right: The VIX index is up 85 percent for the year, but VXX is down 12.6 percent. In fact, VXX’s dive since inception forced a reverse 1-for-4 split in November 2010.

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