Options Traders Smell Fear in the Pits

Stocks' selloff has the volatility index soaring.
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As tech stocks led a marketwide rout Tuesday, some players were seeing the beginnings of a bottom in the sky-high options volatility levels.

With the


off some 8% on the heels of Monday's 7.6% decline, the

Chicago Board Options Exchange's

volatility index was up 33% to 34.10, putting it at levels not seen since late February. Some traders and investors use the VIX to help point them to tops and bottoms in the market. The higher the VIX, so the thinking goes, the nearer the market is to a bottom.

Dan Brady of


in San Francisco said implied volatility has exploded over the last week for options on the

Nasdaq 100

index and the Nasdaq 100 unit trust, the


(QQQ) - Get Report

. Implied volatility refers to the expected price swing in a security.

With the Nasdaq 100 down 415 to 3662 at its intraday bottom, there was a notable pop in volume for the April 4700 call options, with 411 contracts trading compared to open interest yesterday of 139.

As for the Nasdaq 100 unit trusts, the April 95 calls have seen a pickup in volume. By early Tuesday afternoon, 1655 contracts had traded, compared to open interest of 535 Monday. Meanwhile, the QQQ was off 10 7/16 to 92 1/2. The QQQ April 100 calls were most active on the

American Stock Exchange

, with 9551 contracts trading. Those calls were at 4 3/8 ($437.50 per contract), down 3 5/8 ($362.50).

As for QQQ puts, on the Amex, the April 114 puts were most active with 6081 contracts trading. The April 114 puts were lately at 18 3/4 ($1875 per contract), up 6 ($600).