Oct. 6 (Bloomberg) -- The benchmark index for U.S. stock options jumped to the highest in its 18-year history on concern the global economic slowdown will continue on further credit- market losses.

The VIX, as the Chicago Board Options Exchange Volatility Index is known, rose 18 percent to 53.43 at 1:22 p.m. in New York and earlier touched 56.32. The index measures the cost of using options as insurance against declines in the Standard & Poor's 500 Index, which declined 5.4 percent to a five-year low of 1,039.85.

``This is a mad rush to the exits,'' said Simon Emrich, head of North American quantitative derivatives strategies at Morgan Stanley in New York. ``The spike of the VIX is a function of a supply-demand imbalance as people want to get out of risky positions and there's no one to take the other side. Market fundamentals don't matter.''

November VIX futures rose 2.1 percent to 33.25. The most- active options tied to the VIX were October 35 calls, which rose 55 percent to $6.20. The index has averaged 24.38 this year. October 65 calls had the biggest gain among options on the index, quadrupling to 20 cents.

``Options volume is pretty heady in the fear gauge today, which stands at elevated crash-time readings,'' Andrew Wilkinson, a senior market analyst at Greenwich, Connecticut-based Interactive Brokers Group Inc., wrote in a note to clients. ``At the October 37.5, 50 and 55 strikes, more buying was evident as investors clamored for protection.''

New Record

The index eclipsed last week's record close of 46.72 on Sept. 29 when Congress voted against the Bush administration's bailout for financial companies, sending stock benchmarks down the most in two decades.

Before last week the VIX had topped 40 during four prior periods: the aftermath of WorldCom Inc.'s bankruptcy in 2002, the September 2001 terrorist attacks, Long-Term Capital Management's collapse in 1998 and the Asian financial crisis in 1997. The previous record intraday high of 49.53 for the VIX, whose history extends back to 1990, was set on Oct. 8, 1998.

``It's scary the way the market is reacting,'' said Bud Haslett, director of option analytics at Miller Tabak & Co. in New York. ``The downturn in equity prices is broad-based, it has big repercussions for our economy and it's being experienced worldwide.''

The VXO Volatility Index, a predecessor to the VIX that reflects the price of using options on the S&P 100, jumped to the highest since the 1987 crash, adding 18 percent to 61.50. That index peaked at 172.79 a day after the crash.

German Volatility

In Germany, the benchmark gauge of that country's stock- market volatility jumped to a five-year high after the credit crunch forced the country's financial industry to double a credit line for Hypo Real Estate Holding AG. The VDAX-New rose 17 percent to close at 42.80 in Frankfurt. The measure is derived from prices paid for options on the DAX Index, which slumped 7.1 percent to the lowest level since June 2006.

Calls give the right to buy a security for a certain amount, the strike price, by a given date. Puts convey the right to sell. 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: October 6, 2008 13:33 EDT