June 22 (Bloomberg) -- The benchmark index for U.S. stock options climbed the most in nine weeks as equities tumbled on a World Bank report that the global recession will be deeper than expected. Europe’s VStoxx Index surged the most since November.

The VIX, as the Chicago Board Options Exchange Volatility Index is known, jumped 11 percent to 31.17 and earlier reached 32.05. The index measures the cost of using options as insurance against declines in the Standard & Poor’s 500 Index, which tumbled 3.1 percent to 893.04.

“We had a glimmer of confidence, and now that’s been shaken with the World Bank downgrade,” Steve Claussen, chief investment strategist at OptionsHouse LLC, the Chicago-based online brokerage unit of PEAK6 Investments LP. “Investors were looking for more of a V-shaped recovery, and this throws cold water all over that.”

Traders bought protection in the options market after the World Bank said the global recession this year will be deeper than it predicted in March. The global economy will contract 2.9 percent, compared with a previous forecast for a 1.7 percent decline, the Washington-based lender said. Growth will be 2 percent next year, down from a 2.3 percent prediction.

In Europe, the benchmark gauge of stock-market volatility surged the most since Nov. 6. The VStoxx Index, which measures the cost of protecting against a decline in shares on the Dow Jones Euro Stoxx 50 Index, increased 17 percent to close at 36.05 in Frankfurt. The Euro Stoxx 50 tumbled 3.1 percent.

Dutch Volatilty

Volatilty gauges for the U.K., Germany and France closed at least 9 percent higher. The Dutch AEX Volatility Index increased 15 percent in Amsterdam.

“A lot of people are taking a dim view on the prospects for Europe,” said Carl Mason, head of U.S. equity derivatives strategy at BNP Paribas in New York. “There’s a feeling it hasn’t come to terms with the whole downturn and that their response has been much more anemic. People are very concerned about Europe as a place to be invested.”

VIX futures expiring through the end of this year advanced. August futures added 3.2 percent to 32.55. October’s contracts rose 2.4 percent to 32.50.

The VIX has averaged about 20 over its 19-year history. It peaked at 80.86 in November and dipped below 30 in May for the first time in eight months. The index reached an intraday record of 89.53 on Oct. 24.

“The market is very nervous,” said Scott Jacobson, chief investment strategist at New York-based Capstone Sales Advisors LLC, which specializes in volatility trading. “Once in a while you have to realize there’s more risk than you were pricing in.”

Stock Swings

The S&P 500 has risen or fallen by more than 3 percent on 23 trading days this year, the third-most in the benchmark’s 81- year history after 1932 and 1933, according to Howard Silverblatt, the senior index analyst at S&P in New York.

Options give the right though not the obligation to buy or sell a security at a set price and date. Investors use options to guard against fluctuations in the price of securities they own, speculate on share-price moves or bet that volatility, or stock swings, will increase or decrease.

To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net.

Last Updated: June 22, 2009 16:43 EDT