Lancaster Colony Corp. (LANC)

In last week's edition of Trading Tools, office supply sultan Staples, Inc. (SPLS - Snapshot Report) was examined, as it appeared on the Zacks Unusually High Option Volume filter. However, utilizing the Zacks Put/Call Ratio Greater than 1.0 screener today, I stumbled upon another equity that piqued my curiosity: Columbus, Ohio-based Lancaster Colony Corp. (LANC - Snapshot Report), which manufactures an array of products, including specialty foods, glassware, and candles.

The Put/Call Ratio Greater than 1.0 screener

Before we begin, let's break down today's stock screener. The filter looks for stocks with a high put/call open interest ratio, indicating a preference for bearish bets among near-term options. Why is this important? Simply put, a high Schaeffer's put/call open interest ratio (SOIR) – measuring options with less than 3 months until expiration – suggests that expectations for the security to rally are extremely low. In other words, a high ratio usually indicates skepticism among short-term options speculators.

Though volume is light, options traders are leery

According to the Zacks filter, Lancaster's SOIR remains relatively high, pointing to a significant amount of pessimism among short-term options players. More specifically, the security's SOIR rests at a lofty 1.62. Compared to similar readings taken during the past year, the current SOIR registers in the 84th percentile. In other words, near-term options traders have been more bearishly biased toward the equity only 16% of the time during the past 52 weeks.

However, after digging deeper into LANC's options configuration, we find that options are very lightly traded on the equity. Peak put open interest in the soon-to-be front-month April series rests at the 40 strike, home to fewer than 650 contracts. This round-number strike is also home to peak call open interest, with only about 400 bullish bets in residence.

Nevertheless, is the cynicism in the options pits warranted? Let's take a look at LANC's recent performance on the charts and find out...

Besting the broad market...

Since tagging a new annual low near the 26 level in November 2008, shares of LANC have been a beacon of hope on the Street, skyrocketing about 60% higher with help from their 10-day and 30-day moving averages. Further demonstrating the security's muscle on the charts is its performance compared to the broad market. During the past 60 trading sessions, the equity has outshined the S&P 500 Index (SPX) by an impressive 47%.

From a longer-term perspective, we find that LANC's recent dash into the black has it poised to close the month atop its 20-month moving average for only the second time since June 2007. Shares are also sitting atop support in the 37-to-38 neighborhood, which contained most of the equity's pullbacks from late 2002 until early 2008. However, the security's quest for new highs could be stalled in the overhead 45 region, which played the part of staunch resistance during the past few years.

Word on the Street

Similar to LANC's short-term options configuration, analyst coverage on the uptrending security is light. What's more, the 2 brokers bothering to rate the shares are skeptically skewed, despite the stock's status as an outperformer. According to Zacks, the equity currently harbors a lukewarm "hold" and a single "sell" rating, with nary a "buy" in sight.

The bottom line

Overall, it's surprising to see how little attention LANC garners on the Street, considering the stock's achievements on the charts. What's more, it seems the modest recognition the security does attract is primarily pessimistic. However, this bit of bearish sentiment could actually act as a boon for the stock in the near term. Should shares of LANC continue their quest for new highs, taking out potential resistance in the 45 neighborhood, the stock could bait more buyers. Plus, an unwinding of skepticism in the options arena – not to mention a fresh wave of positive analyst initiations, upgrades, and/or price-target boosts – could act as catalysts to the upside for the explosive equity.