14jul08 - PreMarket (VIXCOT)

What is VIX? In a gist, VIX is a measure of Implied Volatility of selected options of stocks listed in SP500 index. Implied Volatility is nothing but a measure of possible stock price fluctuations. Hence, when this IV is heightened, commercials, will begin hedging their portfolio, usually either by Selling Calls or Buying Puts. Therefore, a high IV, can be inferred having NET Short Open Interests, since both Long Puts and Short Calls, culminate to Net Short Open Interests of the VIX.
COT of VIX, therefore can be seen as Net LONG Open Interests of SP500 Index. The higher the COT, especially, from commercials, this imply that commercials are expecting a bottoming out of SP500 index. Conversely, a extreme low of COT on VIX, is a sign of a topping of SP500 index.