This question was inspired by this Motley Fool article: VIX Investing: Why Not Just "Buy Low Fear, Sell High Fear"?
Buying low fear and selling high fear seems to be a guaranteed profit strategy. Simply buy when the VIX index is low, and sell when the VIX index is high. In truth, however, VIX ETFs and ETNs fail to track the VIX accurately, and they actually decline in value over time.
Because VIX futures track the VIX much better than ETFs or ETNs, why can't I use VIX futures instead? Specifically, my strategy is this:
When the market is relatively peaceful and the VIX index is low, buy a VIX futures contract.
Avoid using leverage by putting up the full value of the futures contract in my trading account. This is done in order to avoid margin calls and subsequent liquidation.
Hold the contract for a few months and wait for the market to become volatile.
Sell to close the position when the VIX index is high.
Wouldn't this strategy basically be foolproof and profit-guaranteed? Or did I miss something?