This one is Merrill Lynch guide to VIX futures and options, a research note that dates to December 2008, right after the credit crisis. Although dated, it contains a lot of info that I have not seen elsewhere. There is a very thorough introduction to empirical properties of the VIX (in the appendix), such as negative nonlinear correlation with SPX, and nonlinear "premium" of long-term futures contracts over short-term once, as well as relationship between short and long-term futures.
The main part of the document has an excellent exposition of different alpha strategies in VIX derivatives, as well as comparison to CBOE strategies indexes VPD and VPN. Over the testing period " Short VIX derivative positions would have offered higher returns and lower risk than the S&P 500. Despite the significant spike in volatility over the backtesting period, the returns of the short futures (-5.4%), short calls (2.0%), and short capped futures strategies (-3.8%) were all higher than the S&P 500 (-12.0%) ... All three strategies had nearly half the risk of the S&P 500 (25.6%), varying between 9.2% and 13.6% "
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It is puzzling to consider the conclusion that both the long VIX and short strategies beat the market. For the period in Tables 2 and 4, SPX was -12%. The long VIX call hedger had -0.9%. The short VIX call risk-insurer had 2%. They swapped the same front-month ATM calls. Both sides benefited from the trades. Where was the money from?
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