Is Corinthian Colleges yesterday's news?

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A large trader apparently thinks that Corinthian Colleges has gone from interesting to boring.

The for-profit education stock has roughly tripled since early October, with much of that move following a strong earnings report at the beginning of this month. It's been stalling more recently, and a giant option trade yesterday is looking for that sideways move to continue.

optionMONSTER's systems show that some 25,000 May 4 puts were sold for $0.285 and that an equal number of May 6 calls were sold for $0.29. Volume was more than 17 times open interest at each strike.

The strategy resulted in a credit of $0.575, which the investor will keep if COCO remains between $4 and $6 on expiration. Gains will erode outside that range, turning to losses below $3.425 and above $6.575.

Known as a short strangle , the transaction is an example of a market-neutral trade that makes money from the passage of time rather than a directional move. (See our Education section)

COCO rose 2.09 percent to $4.88 on Wednesday. It peaked around $6 early last year and had support around $4 in July before collapsing along with the rest of the market. Some chart watchers may expect those technical levels to constrain the stock's movement and support the case for the short strangle.

Overall options volume was 18 times greater than average in yesterday's session.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: COCO

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