Options Trading News

May 1, 2012  Tue 3:14 AM CT

Shaw Group recently got a big contract win, and buyers lit up the July options.

The July 34 calls saw strong activity, with investors paying $0.69 to $0.75. More than 4,000 of those contracts changed hands against open interest of 100 contracts--not off the charts, but still heavy for a name that usually trades fewer than 1,300 contracts a day.

Those calls lock in the price investors must pay to buy shares, so they can provide a lot of leverage if the construction company rallies into the summer. But if the stock doesn't move enough, they could expire worthless. (See our Education section)

Shaw closed at $30.27 yesterday, up 0.97 percent. Last week it received notice from South Carolina Electric & Gas to proceed on its engineering, procurement, and construction contract for two Westinghouse AP1000 nuclear power units and related facilities.

More than 7,500 calls traded in the name yesterday versus just 104 puts, a reflection of the session's bullish sentiment.

(A version of this post appeared on InsideOptions Pro yesterday.)

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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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