Basic Points

• Volatility futures (VX) trade on the CFE (CBOE Futures Exchange) and have a contract multiplier that is x1,000 that of their listed prices, and eventually settling in cash at x1,000 that of the VIX price. 
• As a more affordable alternative, micro volatility futures are available (VXM), which have the standard multiplier of x100. 
• On their expiration date, trading on VX futures closes at 9am EST, but “the final settlement value for VX futures shall be a Special Opening Quotation (SOQ) of the VIX Index calculated from the sequence of opening trade prices during the special opening auction conducted on days when VX futures settle” (CBOE). 

Advanced: Volatility Futures and Contango

Unlike the VIX index, which is a passive measure of implied volatility on SPX from 23-37 days to expiration, the VX futures prices are entirely determined by market forces of supply and demand (lots of traders buying these futures causes them to rise in price and vice versa). But the traders also know that these VX futures end up settling on the price of the VX, and so any divergences from VX futures and VIX prices become narrower when approaching VIX expiration. 

Usually, VX futures have a higher and higher price on further out months, which is a shape known as contango. This means that those further-out contracts are trading at a premium to the spot VIX price. However, VX futures can also trade at a discount to the VIX price; when further out months have a lower price this is called backwardation, which signals fear in the market because it means that traders are expecting elevated volatility in the very near future.