Option volatility stabilized Wednesday after spiking sharply in the previous session amid a selloff in the stock market.

The CBOE Market Volatility Index, or VIX, was down 1.1% to 11.44. The VIX, known as the market's "fear gauge," is based on the implied volatility of the S&P 500 options. Generally speaking, the more fearful investors are, the higher the VIX goes, and when the level of fear declines, the measure falls.

The CBOE Nasdaq Volatility Index, which follows the implied volatility of the Nasdaq 100, was lower by 0.9% to 14.45.

Medical-device maker Guidant ( GDT) was again keeping option traders busy a day after the company offered disappointing earnings guidance. The January 60 puts traded 6,000 contracts and were up 5 cents to 90 cents.

The April 60/70 strangle traded 4,200 times. The buyer of a strangle purchases the downside puts and upside calls simultaneously in anticipation of a large move in the stock in either direction. Shares of Guidant were tacking on 13 cents, or 0.2%, to $64.82.

Financial giant J.P. Morgan Chase ( JPM) also saw a strangle trade in its options. The January 2007 40/45 strangle traded 3,800 times. By purchasing the January 2007 options, the trader has a year for the investment to be profitable. The stock was down 12 cents, or 0.3%, to $39.98.

Elsewhere, Juniper Networks ( JNPR) had the January 22.50/February 25 call spread trade more than 10,000 times. This type of trade, also known as a time spread, indicates the buyer is moderately bullish since the 25 calls are out of the money. Shares of Juniper were gaining 44 cents, or 2%, to $22.54.

About 5,000 Celgene ( CELG) January 60 calls changed hands after the Food and Drug Administration cleared the company's anemia drug Revlimid. The calls slipped 30 cents to $2. The January 65 calls traded 4,200 contracts and lost 65 cents to 55 cents. The stock was up $2.58, or 4.5%, to $60.06.

Among the day's other actives, Honeywell's ( HON) June 40 calls traded 7,000 contracts, and Google's ( GOOG) January 430 and 440 calls traded 9,000 times.

Get Jim Cramer's picks for 2006.

More from Options

Comcast Drops Bid, Disney Call Prices Pick up

Comcast Drops Bid, Disney Call Prices Pick up

United Continental Call Prices Fly After Earnings

United Continental Call Prices Fly After Earnings

How to Trade General Electric's Stock After Earnings for Superior Gains

How to Trade General Electric's Stock After Earnings for Superior Gains

6 Chip Stocks to Play Into Earnings

6 Chip Stocks to Play Into Earnings

Why VF Corp. Call Prices Doubled, Before Earnings

Why VF Corp. Call Prices Doubled, Before Earnings