Options: Investors Take to Energy

The first trading day of 2009 ushered in the new year with a rally in the major indexes. One group of stocks that managed to rally even more than the broader market was energy and commodity. Along with the rally came some noteworthy option activity to start off 2009.

For starters, take a look at Schlumberger(SLB Quote). Shares of this oil service company traded up over 7.7% today to close at $45.62. One thing of note in this stock is that with the rally, the price of the January at-the-money straddle declined, a sign of declining implied volatility.

When we went home on Wednesday, the January 40 strike straddle was at the money, and it was trading for around $4.80. Today now, after the rally in the shares, the Jan 45 strike is the new at the money, but the price has come down to $4.33. So the at-the-money straddle went from 12% of strike all the way down to 9.6% of strike.

Another oil service company that saw a rally today was Transocean(RIG Quote). You might remember we talked about RIG earlier this week because there was a substantial buyer of the Jan 2011 120 strike calls. Today RIG gets some more ink because the shares were up over 10% to $52.01.

The January at-the money straddle in RIG did not see as dramatic a decline as SLB experienced, but it declined nonetheless. As of the close on Wednesday, the January 45 strike was at the money, and it closed at $5.60. Today after the rally in the shares, the January 50 straddle was trading for $5.50 -- only a dime decline, but on a percentage basis it went from 12.44% to 11% of strike.