The VIX is an index (not a stock and not an ETF).
In fact, "VIX" is just the symbol used for an index whose official name is CBOE Volatility Index. As its name suggests, the VIX is a volatility index – a number that measures volatility. It is maintained and calculated by Chicago Board Options Exchange (CBOE).
How Does the VIX Differ from a Stock?
Stocks, such as Apple, Microsoft or Citigroup, are securities which represent shares in a company. For instance, if you buy 100 shares of Apple, you actually own a part (albeit a very small part) of the company. When Apple sells enough phones and makes a profit, its management may decide to pay a dividend. In such case, if you are holding the stock at that moment, you receive a dividend payment.
There is no "VIX company" – the VIX does not represent a business. There are no shares in VIX. The VIX does not generate profits and does not pay any dividends.
How Does the VIX Differ from an ETF?
You may argue that ETFs such as SPY or EEM are not companies either, but they trade quite like stocks – you can buy shares in ETFs and even receive dividends from some. This is because ETFs (exchange traded funds) are funds which own a selection of stocks or other assets. You can think of an ETF as a wrapper, a standardized package of assets that you can buy. Assets included in an ETF are not necessarily limited to stocks. They can be bonds, currencies, commodities or their derivatives such as futures or options, or even other ETFs.
VIX Is Not an Asset
One thing that both stocks and ETFs have in common is that they are assets. You can buy them, own them, and sell them – just like you buy, own, and sell houses, cars, and other things. Some assets generate income, others don't.
The VIX is not an asset. It is an index – just a number. You can't buy it and you can't sell it. There is no point in owning a number. It would be like owning today's air temperature – makes no sense.
How to Buy the VIX
The above being said, it is actually possible to buy securities which expose you to the changes in VIX index value – VIX futures, options, and ETFs or ETNs (exchange traded notes, which trade and behave like ETFs, but they are structured differently). This enables you to use the VIX index for hedging or speculation – make or lose money as the VIX index changes.
You can again compare the VIX to something like air temperature. While it makes no sense to buy or own it directly, because it is not an asset, farmers may use weather derivatives (securities which change value or payoff as the temperature changes) to hedge against adverse weather.
Trading the VIX
VIX futures, options, and ETFs/ETNs offer a wide range of opportunities and possible trading strategies. However, before risking money it is very important to have a good understanding of not only how the VIX index itself works (e.g. how it is calculated or how it relates to the S&P500 index), but also how the futures, options, and ETFs/ETNs relate to the VIX index.
You will quickly realize that these relationships are not that straightforward. It is quite common for the VIX index itself to rise and VIX futures or the VXX (long VIX) ETN to go down. An inexperienced trader may see the VIX index at a very low level and buy the futures or the VXX as a sure bet – only to lose money even when he is right about the VIX index direction.
For more detailed discussion of these issues, things to watch out for, and trading strategy suggestions, see trading the VIX.