My understanding: A VIX future contract says Alice pays Bob cash up front for a contract, then Bob pays Alice cash on a specific date in the future based on th

My understanding: A VIX future contract says Alice pays Bob cash up front for a contract, then Bob pays Alice cash on a specific date in the future based on the VIX value on that day, how much depends on a formula based on how low/high the VIX is. The VIX itself is just a number calculated from recent S&P trading prices. The formula that determines how much Alice gets back in different scenarios is the main thing that makes different VIX futures contracts different. The formula can be "long," which means positive slope (higher VIX = Alice gets more) or "short" which means negative slope (higher VIX = Alice gets less). The formula can be "leveraged" which means slope greater than 1 (higher leverage = Alice gains or loses more per unit change in VIX). Alice is called the "party" and Bob's called the "counterparty." A modern futures market has a small set of standardized contracts and a settlement / clearing system which allows anyone with a brokerage and enough money to act as a party or counterparty. So the ETF basically takes investors' cash and buys a bunch of futures, which could all be from a bunch of different counterparties. The counterparties for the short futures have been losing money (paying more out at the end of each contract than they got at the beginning), which is where the money the ETF investors have been making up until now comes from (the numbers work out so that Bob was paying Alice more than Alice paid Bob). But this time the counterparties are making money (Bob pays Alice less at the end than Alice paid Bob at the beginning). Because of leverage, in the worst case Alice could lose most or all of the money she put into the futures contract. Because this ETF's purpose is to put all of its investors' money into this futures contract, if you invested in this ETF you were making money before, but now you've lost nearly all of it.