(List compiled by Eben Esterhuizen, CFA)
Looking for possible rebound ideas? To help you get started, we identified a list of stocks that have seen an increase in the number of open call options relative to put options (a bullish development).
In addition, all of the stocks mentioned below have seen a significant amount of institutional selling during the current quarter.
Not sure what these terms mean? Not to worry, here’s a quick summary of the key terms you need to know to understand the screen. The complete list follows below.
The Put/Call Ratio
In general, a put option reflects an opinion that the price of a given stock will fall, while a call option reflects an opinion that the price of a given stock will rise.
Put/Call ratio is the total number of put options relative to the total number of call options for a given stock. If there are more put options (a put/call ratio greater than 1), then there are more investors who think that the share price will decrease than there are investors who think that the share price will increase.
To put it simply, a rising Put/Call ratio reflects an increase in bearish sentiment, while a decreasing Put/Call ratio reflects an increase in bullish bets.
Institutional investors are also known as “big money” investors or managers. They represent big pools of money such as investment banks, pension funds, mutual funds, hedge funds, endowment funds, etc.
Because institutional investors handle such large amounts of money, these investors spend a lot of time and energy researching companies to invest in.
Regular investors pay attention to what institutional investors do because it is easy enough to assume that the big money managers know what they are doing — or at the very least know more than the average investor. This is why these investors are also sometimes referred to as “smart money”. If institutional investors start investing in a company, regular investors can assume that some of the most talented analysts and money managers expect the company’s share prices to increase over time.
Now that you’re armed with this information, you’re ready to analyse the list below.
Institutional investors have been dumping these shares over recent months, but options traders appear to be positioning for a rebound–which side are you on?
List sorted by the relative change in the Put/Call ratio.
analyse These Ideas (Tools Will Open In A New Window)
1. Great Lakes Dredge & Dock Corporation (GLDD): Engages in the business of marine construction, primarily dredging, and commercial and industrial demolition principally in the east, west, and Gulf Coasts of the United States. Open interest Put/Call ratio changed from 0.22 to 0.12 between 09/21/11 to 10/04/11, a change of -45.45%. Net institutional sales in the current quarter at -2.4M shares, which represents about 4.36% of the company’s float of 55.06M shares.
2. CoreLogic, Inc. (CLGX): Provides property, financial, and consumer information, analytics, and services to mortgage originators and servicers, financial institutions, government and government-sponsored enterprises, and other businesses in the United States. Open interest Put/Call ratio changed from 0.58 to 0.37 between 09/21/11 to 10/04/11, a change of -36.21%. Net institutional sales in the current quarter at -3.7M shares, which represents about 3.89% of the company’s float of 95.16M shares.
3. Allos Therapeutics, Inc. (ALTH): Engages in the development and commercialization of anti-cancer therapeutics. Open interest Put/Call ratio changed from 0.26 to 0.19 between 09/21/11 to 10/04/11, a change of -26.92%. Net institutional sales in the current quarter at -6.2M shares, which represents about 9.07% of the company’s float of 68.36M shares.
4. DSW Inc. (DSW): Operates as a specialty branded footwear retailer in the U. Open interest Put/Call ratio changed from 0.77 to 0.59 between 09/21/11 to 10/04/11, a change of -23.38%. Net institutional sales in the current quarter at -3.1M shares, which represents about 12.3% of the company’s float of 25.20M shares.
Interactive Chart: Press Play to see how analyst ratings have changed for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.