In last week's edition of Trading Tools, shipping concern
TBS International Limited (
TBSI) was examined, as it appeared on the
Zacks Put/Call Ratio Greater than 1.0 filter. However, utilizing the
Zacks Unusually High Call Volume screener today, I stumbled upon another equity that piqued my curiosity: construction company
The Shaw Group Inc. (
SGR).
Before we begin, let's explain the contrarian stance that makes Schaeffer's so unique. When searching for a bullish pick, we like to see heavy skepticism toward an outperforming stock, as this leaves ample room for upgrades or other positive catalysts to fuel the stock higher. When searching for a bearish pick, on the other hand, contrarians are looking for significant bullish sentiment toward an underperforming stock, as we believe an excess of optimism is a sign that everyone has already bought into the stock and sideline money is virtually tapped out.
Nevertheless, keep in mind that some optimism and pessimism is genuinely warranted and isn't always a contrarian indicator ? like an outperforming stock with many "buy" ratings or an underperforming stock with a plethora of "sell" ratings.
The Unusually High Option Volume Screener
This filter is somewhat self-explanatory. It looks for stocks with single-day option volume in excess of their average volume over the last month. Why is this important? Simply put, this filter allows us to read how options traders feel about a certain stock, and sometimes unusually heavy option activity can be the sign of an event (like earnings or merger-and-acquisition news, for instance) or, occasionally, a reversal of sentiment in the options pits.
A Build-Up of Bearish Bets
According to the Zacks filter, the engineering issue was bombarded by bullish bettors last Thursday. More specifically, the security saw more than 11,000 calls change hands ? 8 times its average single-day volume of fewer than 1,500 contracts.
Most of the optimistic option activity centered on SGR's January 2009 25 strike, with volume of more than 4,750 contracts crossing the tape.
