End users typically hold net long VIX call options to hedge against market downturns but paradoxically reduce these positions during such times. We explain this puzzle by estimating the latent demand curves for market makers and end users in a zero net supply market, using the time series of their net positions and equilibrium prices. During high-risk periods, both demand curves shift right, with market maker demand reacting more strongly, especially for short-maturity options. This results in reduced net long positions of end users, higher volatility returns, and wider bid-ask spreads. Unconditionally, market maker demand increases when inventory constraints and expected volatility returns are high, highlighting their role in shaping market equilibrium as they manage inventory and profits while maintaining continuous market liquidity.