With the “generals” finally meeting their reality-maker, investors appear to be questioning the DotCom bubble-like highs as momentum collapses. “Exuberance has turned to panic pretty quickly,” notes one asset manager and after a very rapid plunge in recent days, options traders are piling into protection at a pace not seen since Q4 2008.

The Nasdaq-S&P implied vol spread is more than double its 5 year average…

(ignore the spikes as they represent rolls as opposed to trends)

As Bloomberg reports, options traders are betting the pain is far from over in the Nasdaq 100 Index, driving the cost of protection to its highest relative to the S&P since the middle of the financial crisis in 2008.

It's the latest exodus from risk in the U.S. equity market, with selling that started in energy shares spreading to everything from health-care to banks. Technology companies, which until recently had been spared because of their low debt burden and rising earnings, joined the rout as investors focus on elevated valuations among the industry's biggest stocks.

“Exuberance has turned to panic pretty quickly,” said Stephen Solaka, managing partner of Belmont Capital Group in Los Angeles, which oversees about $400 million. “Technology stocks have had quite a run, and now they're seeing momentum the other way.”

Options are signaling more trouble ahead just as professional speculators dump bullish wagers on the group. Hedge funds and large speculators have pared back their long positions on the Nasdaq 100 for a fourth week out of five, data from the Commodity Futures Trading Commission show.

“Tech names had become a crowded long, and now we are seeing the unwind,” said Pravit Chintawongvanich, a New York-based derivatives strategist at Macro Risk Advisors. “Investors are willing to pay up for protection in tech and growth names. It is probably justified. You could see this volatility spread widen even further.”