Here's how incestuous the financial market's derivatives have become. We'll use UVXY Options for this example.

Layer 1: Option contract on UVXY (Vix ETF). Basically, a leveraged rental of the UVXY ETF.

Layer 2: UVXY ETF. A fund which holds VIX Futures.

Layer 3: VIX Futures. A paper financial instrument, designed to track the VIX Index.

Layer 4: VIX Index: An imaginary index, calculated based off the midpoint of S&P Option prices to indicate market volatility. Yes, another option contract. Stay with me.

Layer 5: S&P Options. Derivatives on the S&P 500 Index.

Layer 6: S&P 500 Index. A Standard & Poor's subjective calculation of the USA Stock market as a whole. The index itself does not directly own a single stock. It's just a number value.

SUMMARY: A option, on an ETF, on a future, on an Index, on an option, on an imaginary index WHICH OWNS NOTHING.

When people talk about the $1 Trillion derivatives bubble, this is exactly what they're talking about.