I think many of you guys have a wrong assumption that vol futures prices always go lower to spot. Just the past few weeks spot went over the future price...and the vol futures still went up..so one can say the futures were underpriced on the entire term lately. See 2011 summer, may June 2010, 2009...and 2008 just for recent history for under priced vol.
no-one here is giving you an accurate explanation Why do vix future position decay? They dont always. It depends on the shapre of the vix futures curve. If its upward sloping, agents are expecting volatility to rise in the future. If its downward sloping, agents are expecting volatility to fall in the future. Of course it could be flat/kinked/bell shaped - anything. In the first case, your futures position will "decay" if VIX stays at the same level, because you bought a future at a price that was higher than the current vix level... You were expecting it to rise and it stayed the same. Clearly the nearer we get to expiry the lower the expected VIX will be in this scenario, if the vix stays constant.
@ all the previous posters, mostly agreed, especially sj8070 @ OP : Just read the paper, what these guys and I are saying is in there, plus a free strategy for selling "insurance". I was just assuming the OP was focusing on the decay when selling options, probably due to his nickname, but either way it's linked. Volatility Risk Premium can be bought (again, read the paper, it's free and worth your time). Look at contango and backwardation differences, there's a historical chart there too, etc.
VIX^2 underestimates vol, which leads us to the real question.. why isn't 'vol' actually 'tradeable'? Vol swaps would be much more popular if it were easy. VIX doesn't exactly track vol plain and simple, VIX index is essentially 30-day fair strike of a variance swap. There's a negative convexity relationship between variance swaps and vol swaps, simply taking the sqrt of a variance swap will not give a vol swap. What you're describing is VIX rolldown/term-structure skew which is a separate issue.
you can buy and hold volatility. Nothing prevents you from being persistently long a variance swap or being long listed vol.
there's a lot of confusion in this thread of what 'long vol' means. OP was presumably asking about the decay of VIX etfs, which is exposure neither to implied vol nor realized vol, but the future expectations of implied vol (variance, technically speaking).
That is correct, the forward price is not an signifigant predictor of the spot price, in fact it is the other way around. The spot price is a significant predictor of the futures price. Here is a pretty decent article on VIX futures related stuff: http://goo.gl/AY21k