Responding to mounting charges of fraud and manipulation in stock options trading, the staff of the Securities and Exchange Commission yesterday issued a report calling for tougher regulation of the fast-growing options market.

The staff report was ordered by the SEC in 1977 after numerous abuses were reported in stock options trading. In August, 1977, the commission ordered a freeze on the number of stocks on which options could be written and on exchanges where options are traded.

Yesterday, SEC chairman Harold Williams said the moratorium would remain in effect for several more moths.

"It is the commission's... desire that the moratorium be lifted in well under a year," Williams said. "But the whole question of when it is lifted would depend to a very large extent on the responsiveness of the self-regulatory organizations."

The presidents of the Securities Industry Association and The American Stock Exchange praised the report and said that any abuses that still exist are being corrected.

An option is a contract to buy or sell a certain stock within a specific period of time, regardless of whether the price of that stock moves up or down in that period.

One reason stock options are so popular is that they require a smaller capital investment than the outright purchase of stock. Also, brokerage commissions are lower.

But the risk to the investor also is higher, and as the SEC staff report noted, inadequate oversight by the various exchanges that handle options makes customers vulnerable to shoddy brokerage practices.

Richard Teberg, who directed the SEC study, said in a cover letter that the staff "found numerous instances of sales practice abuses in which registered representatives told investors of possible rewards they might expect from options without simultaneously warning them of the risks inherent in options trading."

The study recommended that brokerage houses exercise tighter control over their sales personnel, that the SEC establish permanent oversight of the listed stock options markets and that the entire securities industry, in addition to the SEC, intensify scrutiny over the markets.

Stock options currently are traded on the Chicago Board Options Exchange, the American Stock Exchange and the Pacific, Philadelphia and Midwest stock exchanges.

In 1973, the SEC authorized the Chicago exchange to "test the market" in trading options in 16 underlying stocks. The initial test was only on "call" options -- contracts to buy a specific number of shares. Large trading began in a limited number of "put" options, which are contracts to sell in anticipation that a stock will drop within a specified period.

The Chicago exchange in its first year of operations had an average daily volume of 6,500 contracts traded. The average daily volume last month was 151,000 contracts. Now there are five exchanges, and the New York Stock Exchange, the country's largest, also is interested in entering the options business.

The report found that some brokers selling stock options did not understand what they were selling. "Often," the report said, "inadequately trained registered representatives recommended options strategies to their customers which it is doubtful that the salesmen, much less the customers, understood."