We have a contact in the VIX pit in Chicago. I brought up the very odd behavior of the VIX lately, suggesting it seemed to be 'broken'. He said he isn't sure what's going on, but that something isn't right. So I told him a pet theory of mine: My theory is, since the VIX pit has become highly active (options volume on the VIX itself has become highly liquid over the past 6 mo's or so, and is now the most active pit at the options exchange), i hypothesized that some who wanted to hedge would choose to buy calls on the VIX rather than puts on the SPX, and that this would artificially suppress the VIX reading. He wasn't sure what to make of it. But this is a guy who's been a market maker there for over a decade, and he closed the conversation by saying that he couldn't discount it, based on what he was seeing. Obviously the ramifications of this are that once everyone figures out that others are doing the same thing, they know they have an ineffective hedge, and should logically revert to SPX puts to shore up exposure. But then the VIX will move which will be a disincentive to switch for those still in the VIX call, etc.. Carried out to its logical extreme, the greater the activity in the VIX pit, the less the VIX will reflect true fear of a multi-std-dev move in spx. I should say that he didn't exactly agree with this theory, but he did say he hasn't ever seen this and he was "perplexed". I'm not exactly sure this makes sense..probably doesn't. Anyone else have a better theory? Also note that VXN was down intraday on a day when the NDX was down over 2%. F'd up action.