Options: Investors Take to Energy

One last stock to look at gives a glimpse at how the metal stocks also rallied today. Iron ore producer Cliffs Natural Resources(CLF Quote) saw its shares advance over 14% in Friday's trade. The at-the-money straddle also saw a decline in percentage as it went from the 25 strike and 15.9% of strike on Wednesday to the 30 strike and 13.8% today.

Perhaps what is most interesting about the activity today in these stocks is that there was no specific news to explain the big price jumps. However, it is worth remembering that this group of stocks had been pummeled since mid-July 2008, with most of them far underperforming the broader market in that time. With the rout in the stocks came spiking implied volatility.

Today's price action could suggest that investors were avoiding these stocks until 2008 ended. Now that the new year is upon us, investors are putting some cash to work. And as they pump up the share prices, they are reducing their fear, as seen by the implied volatility in the straddles. Is this a change in momentum for this sector or just a dead cat bounce? Time will tell.

Jud Pyle is the chief investment strategist for Options News Network and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.