Why don’t VIX options track the VIX?
• For a typical options marketplace to function the option market makers need to be able to buy or sell the thing the options are based on (this is called the “underlying”). So far no one has figured out how to make the VIX index investible—it is a computed index that can’t be cost effectively replicated in the real world. Since the VIX index isn’t practical as an underlying VIX options are based on volatility futures that are traded on commodity exchanges. These volatility futures typically lag the VIX index in both directions, up and down.
