Options Love Shaw Group's China Nuke Deal

Traders are bullish on the Shaw Group, buying both stock and options contracts after the engineering company announced a strategic deal to help build nuclear power plants in China.

The average daily options volume for the engineering company is just over 5,000 contracts, but more than 32,000 change hands yesterday. Trading was particularly heavy at various May strike prices, from May 27 to May 33, with call buying well above open interest at most of those contracts.

The May 32 strike, for example, saw more than 2,900 calls trade against open interest of just 168 contracts, more than half of them bought for the asking price and therefore a bullish indication.

Trading was also active in July, where 6,001 calls traded against open interest of 1,671 contracts at the July 35 strike and 5,275 puts traded against open interest of 1,841 at the July 25 price. At least one large investor appears to have sold the July 25 puts to fund the purchase of the July 35 calls minutes later in an overall bullish trade.

Options Education:

SGR stock closed Tuesday trading up 5.44 percent on the day to $30.24. The stock's trading volume of 4.28 million shares was more than 88 percent higher than the daily average, spiking immediately after the China deal hit the wires yesterday morning.

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Mike Yamamoto is an analyst and writer for OptionMonster.