Correction by Adam:
So when I critiqued some Power Lunch misinfo on the VIX yesterday, made an error myself. I said this.
…..the VIX is a normalized 30 day reading of a hypothetical ATM option in SPX. EXPIRATION HAS VERY LITTLE TO DO WITH IT. VIX is weighted, so ergo an option with 1 day to go has relatively small impact on the calculation. It will decline modestly when Octs expire since Octs are thru the roof.
Fact is, Oct. options have NOTHING to do with the VIX calculation. This from the CBOE white paper on the VIX.
….with 8 days left to expiration, the new VIX "rolls" to the second and third contract month’s in order to minimize pricing anonmalies that might occur close to expiration.
Thanks to those who pointed this out. It’s truly news to me, I just assumed that the near month options stayed in until the bitter end, but simply had very little weight. My bad.
But my larger point still holds. They gave a completely innaccurate picture regarding the Oct options and the VIX. Not to mention they fact they portrayed it as if the expiration was the VIX option expiration on Wednesday. Again, the *cash* VIX is calculated off SPX options.
The real larger point would be, none of this really matters at all. The VIX is just a statistic, a handy snapshot of volatility, or Fear. There’s no special magic there in any number. I get a way better feel for volatility looking at an options screen itself. And trading stocks.
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A note on the VIX by Adam Warner, at Daily Options Report. 
Even More To Learn About the VIX
OK, great discussion here on Power Lunch on the VIX. NOT.
First off, the VIX is a normalized 30 day reading of a hypothetical ATM option in SPX. EXPIRATION HAS VERY LITTLE TO DO WITH IT. VIX is weighted, so ergo an option with 1 day to go has relatively small impact on the calculation. It will decline modestly when Octs expire since Octs are thru the roof. That’s the Octs in the SPX I should note, NOT Octs in the VIX products. They have literally nothing to do with the calculation of the actual VIX.
They’ve all agreed that the VIX is a "sale" here at 80. Well, 75 now. And it will be in the 50’s next time Dr. J pops into the studio.
Fine, agreed too.
So how exactly do you "sell" it.
Oct futures/options in the VIX expire pre-open (I believe) next Wednesday. They are cash settled, and currently price the VIX at about 64-65. Meaning that is your breakeven. And again, it’s cash settled, so the "bet" expires then and there.
Nov futures/options price the VIX at about 45. Which is to say, that’s the price they expect to see the VIX on November expiration. So believe it or not, oh VIX sages, if you think the VIX is going to the 50’s, you should go LONG it.
Go out to Dec., and it’s high 30’s VIX.
So as you can see, in order to "lock in" VIX sales here, you would have to actually short SPY or SPX options. That can be a very good idea. Or not. To win that bet though, you need options volatility to go below actual stock volatility. That will certainly happen at some point, but so far, it has not. 10 Day HV in the SPY is now about 100. ATR and BB Width keeps rising.
This is all not to say that shorting puts or shorting straddles won’t work, it will eventually, big time. Just saying that so far, it has been the worst way to play this environment. Call buys have trumped put sales in the sense they have lost way less in general. Or won more if you timed it perfectly. Straddle sales have gotten whipsawed in these 1000 point swings, the only "win" there was having them on somewhere in this range, and ignoring the swings.
