"Up by the end of the day," predicted index money manager Rob Sorrentino with Sorrentino Asset Management.

That would be quite a turnaround in the stock market, but it already seems to be happening. The key to Sorrentino's prediction is that fear hasn't gone through the roof. "There's no panicking, at least from an option volatility standpoint. I'm looking for a turnaround today," Sorrentino said.

Volatility Index
Today % Change
29.65 +4.22
Source: ILX
Volatility may be an arcane concept, but it's a key indicator for professional traders. Since volatility in index options has remained low, Sorrentino pointed out, it seems that not too many pros are worried about this stomach-heaving Tuesday morning trading session.

On a rough-and-tumble February expiration, more money came out of the Dow and the Standard & Poor's indices and into the Nasdaq.

Put/Call Ratio
Today (Noon) Previous Close
0.37 0.52
Source: ILX
"I think that that is done; S&P and Dow will catch a bid today, and there could be some weakness in the Nasdaq. Not that it will correct 10%, but the option prices are saying the volatilities are coming in," he said.

Declining volatility measures on S&P 100 and 500 index options means, essentially, that prices of puts have topped out because whatever buying pressure had come from institutions needing to hedge has somewhat dissipated. Institutions typically buy puts, which give them a right to sell an index at a preset price, when they're concerned with the market's short-term future.

Despite Sorrentino's beliefs, continued put-buying was being seen in the key Nasdaq proxy, the QQQ ( QQQ). The Nasdaq 100 unit trust made yet another appearance on the most-actives list Tuesday.

The Mighty Q had another big day. The open interest in March 180 puts lately totaled 42,000 and logged a 10,000 contract order at a price of 4 7/8 (487.50), up 5/8 ($62.50). The QQQ itself was down 1 1/4 to 195 5/8.

The last time big put-buyers visited the QQQ, more than 29,200 contracts moved in the March 180 puts, and 22,000 contracts moved in its March 164 puts.

There also was continued put-buying in key technology names, showing that some investors may be trying to protect themselves from any further weakness.

In Oracle ( ORCL), for instance, open interest in the March 60 put contract was 22,000 contracts, while volume hit 3,192 contracts. Oracle's shares were down 1 3/8 to 57 3/16 by midday.

Tony Burek of Schaeffer's Investment Research pointed out that the low for the underlying stock has been at 60. "This buildup of pessimism bodes well for bullish price action in the near term," he said, leaning on the options' markets longstanding tradition of contrarian thinking. "This appears to be the case with Oracle at this time. It will be key to watch this stock with respect to the 60 level and the open interest at this strike," he added.

Who knew what when in SBC ( SBC)?

In SBC's option pit last week, a whopping 8,800 contracts crossed the tape on the out-of-the-money April 35 put. This option was among the most active put contracts on the Chicago Board Options Exchange and Pacific Exchange last week.

A large put bet like that may have indicated an investor knew the company was due to make a big announcement that would pressure the stock price.

Open interest at this strike stood at 12,000 contracts heading into this morning's trading, and the April 35 puts were lately up 1/8 ($12.50) to 2 1/8 ($212.50), while the stock was down 2 3/8 to 35 7/8 after news that SBC will buy Sterling Commerce ( SE) for $3.9 billion.

Very little of that open interest, however, is being cashed in today despite the stock slip.

A CBOE spokesman did not immediately return calls for comment, and a Pacific spokesman declined to comment.