TABB: When Investing With Volatility Products, Watch Roll Costs, Asset Depreciation

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One of the most significant issues investors face when understanding volatility products is that they do not always follow the underlying VIX index tic for tic.

Volatility-based investing has dramatically risen in popularity over the last decade as investors have become increasingly sophisticated, diversifying from a simple portfolio of stocks and bonds. In fact, there have been days when trading volume in CBOE VIX derivatives exceeds that of the SPDR S&P 500 ETF (SPY). But there are issues investors must consider, noted…