Europe Options Index Posts Steepest Two-Day Slide Since March

By Michael Patterson

Sept. 22 (Bloomberg) -- The benchmark index for European stock options posted its steepest two-day slide since March as U.S. lawmakers considered a $700 billion plan to purchase devalued assets from banks.

The VStoxx fell 11 percent to 31.19 as of 12:56 p.m. in Frankfurt, bringing its two-day drop to 17 percent. The index measures the cost of using options as insurance against declines in the Dow Jones Euro Stoxx 50 Index, which fell 0.2 percent today.

The Treasury's plan is aimed at averting a financial meltdown after mortgage-related losses helped spur the bankruptcy of Lehman Brothers Holdings Inc. and government takeovers of Fannie Mae, Freddie Mac and American International Group Inc. In its latest guidance on the bad-debt fund, the Treasury said firms that have their headquarters outside the U.S. will now be eligible for assistance.

The VStoxx is still up 51 percent from a three-month low on Aug. 29. The gauge surged 30 percent last week and climbed to an eight-month high on Sept. 18.

To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.