For investors looking to profit from market ups and downs, there are a variety of volatility exchange-traded funds (ETFs) that are typically linked to the CBOE Volatility Index (VIX).

With the start of the pandemic in March 2020, market volatility reached its highest level in more than a decade. After moderating through the rest of that year and 2021, it increased again in the early stages of Russia's invasion of Ukraine in 2022. For most of 2023, volatility has again fallen to near pre-pandemic levels.

Investors seeking exposure to the VIX can't invest in the index directly. So VIX ETFs provide sophisticated investors a way of tracking volatility through VIX futures contracts. These contracts will rise and fall in price alongside volatility, although not always in a way directly correlated with the VIX's movement.

Investors typically hold VIX ETFs for a short period of time to capitalize on rapid shifts in volatility, making these funds a poor choice for buy-and-hold investors. These ETFs are complex financial instruments that aren't intended for beginners.

There are five VIX ETFs currently trading in the U.S., not including inverse and leveraged funds. The VIX has fallen 40.9% in the past year, while the S&P 500's total return over the same period was 16.7%, as of Sept. 26.

While most investors tend to trade VIX ETFs on a short-term basis, the best-performing VIX ETF over a trailing 12-month period is the iPath Series B S&P 500 VIX Mid-Term Futures ETN (VXZ).

Below, we look more closely at the three best-performing VIX ETFs for the final quarter of 2023, based on returns over the last year. All numbers for each ETF below are as of Sept. 25.

iPath Series B S&P 500 VIX Mid-Term Futures ETN (VXZ)

• Performance Over 1 Year: -43.4%
• Expense Ratio: 0.89%
• Annual Dividend Yield: N/A
• Three-Month Average Daily Volume: 62,777
• Assets Under Management: $49 million
• Inception Date: Jan. 17, 2018
• Issuer: Barclays Capital

VXZ is structured as an exchange-traded note (ETN), a type of unsecured debt security that makes no interest payments and has stock-like characteristics. This fund tracks the S&P 500 VIX Mid-Term Futures Index Total Return, providing exposure to a daily rolling long position in the fourth-, fifth-, sixth-, and seventh-month VIX futures contracts.

The index represents market participants’ views on the performance of the VIX in the future. VXZ is composed of longer-dated futures contracts, making it less likely to correlate with the spot VIX. Still, most investors trade VXZ on a short-term basis, as it avoids tracking errors.

ProShares VIX Mid-Term Futures ETF (VIXM)

• Performance Over 1 Year: -44.2%
• Expense Ratio: 0.85%
• Annual Dividend Yield: N/A
• Three-Month Average Daily Volume: 92,514
• Assets Under Management: $58.9 million
• Inception Date: Jan. 3, 2011
• Issuer: ProShares

VIXM is structured as a commodity pool, a type of private investment combining investor contributions to trade commodities futures and options. This fund targets the S&P 500 VIX Mid-Term Futures Index, which measures the returns of a portfolio of monthly VIX futures contracts having a weighted average of five months to expiration.

The fund provides returns based on increases in the expected volatility of the S&P 500. Notably, this fund doesn't track the VIX specifically and should be expected to perform very differently from that index. Like the other volatility-related funds, VIXM should be approached as a complex investment vehicle for experienced traders holding the fund for a short time only.

iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX)

• Performance Over 1 Year: -71.1%
• Expense Ratio: 0.89%
• Annual Dividend Yield: N/A
• Three-Month Average Daily Volume: 10,037,906
• Assets Under Management: $457.1 million
• Inception Date: Jan. 19, 2018
• Issuer: Barclays Capital

Like VXZ above, VXX is structured as an ETN. VXX tracks the S&P 500 VIX Short-Term Futures Index Total Return, which is similar to the benchmark index for VXZ except for the key difference that this index provides exposure to first- and second-month VIX futures contracts.

Like the other funds on this list, VXX doesn't offer a spot investment in the VIX. Because it focuses on short-dated futures contracts, it tends to correlate more closely to that index, but it is also at an increased risk of contango. For these reasons, VXX is also most suitable for seasoned investors.

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As of the date this article was written, the author did not own any of the above ETFs.