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

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…