The stock market tanked as much as 235 points, or roughly 2%, before recovering slightly Friday, and some options traders are anticipating another possible spike in volatility Monday ahead of a key

Federal Open Market Committee

meeting Tuesday.

Nearly everyone had their finger in the interest-rate wind Friday, trying to sense whether the FOMC meeting will give a bias one way or the other towards raising interest rates, resurrecting the inflationary bogey-man Wall Street believed was long dead.

"There's going to be a fair amount of volatility on Monday, and very wimpy price action" in index options such as the

OEX

and the

Standard & Poor's 100 index

, said Phil Sylvester, a Chicago-based trader of the OEX options. With so much put traffic coming late in the week, it seems as though hedging positions are pretty much in place.

"There was an immediate tone change in the market Friday, and now everybody's looking for inflation," he added. And after Tuesday? Key economic data are bound to start giving the market the willies like in the bygone days, he predicted. "My call is before the next

CPI

and

PPI

numbers, the

VIX

the options market's indicator of fear as reflected by options prices will blow up again. There will be a lot of anxiety right before that. It's possible the market will get whacked again," he says.

The OEX closed Friday at 673.5, down 15.7, while the VIX shot up to 29.66, gaining 3.20.

Large orders for OEX puts started showing up in size later in the session, he added, noting "someone's buying insurance on their portfolio."

Weakness in technology sectors also dampened early call buying in options, according to the head of one New York-based options desk. "The afternoon got quiet, with some people not selling, but just adjusting their hedges."

OEX put trading continued until the very last moment, with the most actively-traded out-of-the-money series being the May 670 puts, up 4 1/2 ($450) to 8 1/8 ($812.50) on volume of 7,948 contracts against open interest of 12,700.

As a result of the market's worries, the May 670 puts gained even more premium throughout the day. Earlier in Friday's session, the May 670s had been trading up 3 3/8 ($337.50) to 7 ($700).