The explosive growth of derivative products has played a role in increasing and spreading market irrationality and a movement away from fundamentals in influencing stock market traders. During the period 2000 to the collapse in 2007 -09 this explosion of artificial tradable collateralized debt obligations including synthetic portfolios and other exotica like credit default swaps greatly exaggerated the impact of the collapse of the housing bubble. This may well have happened during the most recent stock market swoon driven in part by shenanigans in short selling the volatility index, the VIX which we must note is constructed using the implied volatility of a wide range of the S&P 500 index from both calls and puts.The index is expectations driven and is not the literal variance but rather the implied variance based on the premiums that investors are willing to pay for the right to buy or sell stocks.The VIX takes the weighted average of all the option prices and attaches a single number to them which is called the VIX. For example if the VIX is 22 that means that the S&P is expected to stay within plus or minus 22 % range over a year a percentage of the time which represents one standard deviation. So clearly very few investors will understand how contingent and uncertain this product is nor also that it is expectations based and there is a built in margin of considerable error given the uncertain nature of probability. Choosing to short an index like this is a very risky strategy and it can and did backfire badly spreading its negative sentiment and panic selling. Further regulatory reform is in order.