ITT Education gets a bearish grade

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ITT Educational Services started June with a bang, but one bear apparently thinks that it will go out with a whimper.

optionMONSTER's Depth Charge tracking system detected the purchase of about 2,800 June 77.50 puts for about $0.59 and the sale of an equal number of June 72.50 puts for $0.09. Volume was more than triple open interest in both strikes.

This put spread resulted in a net debit of $0.50 and will earn a maximum profit of 900 percent if the for-profit college stock closes at or below $72.50 on expiration.

ESI rose 0.89 percent to $82.86 in morning trading. It surged 21 percent on June 2 after the Education Department issued new rules regulating student loans. The regulations were more lenient than feared, removing a cloud of uncertainty hanging over an industry that relies on government money for most of its revenue.

Today's option trade reflects a belief that ESI may now push lower and fill the bullish gap that occurred after the news came out.

Puts outnumber calls by 17 to 1 in the stock, which reflects the bearish sentiment.



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 Ā© 2010 OptionMonsterĀ® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

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