'Fear gauge' hits three-month high as US stocks sell off

NEW YORK - A hefty U.S. stocks sell-off sent Wall Street's most watched gauge of market volatility to a three-month high and boosted options trading volume on Wednesday, though strategists saw little evidence of panic.

As stocks tumbled, the Cboe Volatility Index - known as Wall Street's fear gauge because it measures demand for protection against stock swings - shot to 18.46, the highest since late April. Options on the VIX changed hands at nearly twice the usual pace on Tuesday, Trade Alert data showed.

"We're not seeing a whole lot of fear in the marketplace, meaning that people aren't going out and trying to buy protection aggressively," said Matthew Tym, head of equity derivatives trading at Cantor Fitzgerald. "It's kind of very orderly and kind of passive, which indicates to me that nobody's in a bad spot right here yet."

Others, however, were taking advantage of the greater market volatility to bet that calm will return soon. "While the crowd is hedging and hoping to time the in and out with that hedge, I'm shorting UVXY/VXX outright, as it climbs, and will simply await the inevitable plunge in volatility," said Seth Golden, president of investment research firm Finom Group.

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