Lower VIX is cash in the bank holding decaying short options. Premiums invariably fall when the market the stays flat.
Just 2 weeks ago with the VIX going up, I was seeing eye popping increases in the value of options, FSLR for example, even while stock price stayed the same. I was seeing that my maintenance obligations on stocks like FSLR explode while stock barely moved since both calls and puts values went up crazy. I had to close down some short positions that I held because I couldn't hold the total quantity of positions vs a situation where I was getting wiped out dollar wise. Luckliy my broker has had enough experience and had a manager who understood what was needed to be done to meet any maintenance requirements.
Back in 2000, I had a account where the brokerage manager gave an edict to my broker "you can't buy anything, you can only sell positions" It took about 2-3 hours to convince him that since I was mostly short options the only thing I could due to reduce maintenance was "buy" a position to close.
Where the market goes is totally dependent on how many jobs get lost; which leads to how many houses go into foreclosure, which leads to writedowns at banks; which leads to equity reallocation to cash and bonds; which leads to lower stock markets; which leads to lower consumer inclination to spend; which leads to a positively feedback cycle all over again.
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