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. ...