CDS index options are traded off the two main families of CDS indexes -- the U.S.-based CDX and the European-based iTraxx. They work like U.S. equity index options. They provide users with the right to buy or sell protection at a specified time and spread level off the CDS indices. During periods of low credit activity, CDS options can provide market participants the ability to leverage volatility in a cost-effective way. 
- Fitch Survey: Credit Default Swap CDS Options: What They Are, Who Is Using Them, and Why. bnet.
- Despite reform, CDS options go from toxic to tasty. Marketwatch.
- Bloomberg Launches First Benchmark Analytic for CDS Index Options. Bloomberg.