Education companies have been rallying after a huge selloff
earlier in the year, and now the options action is surging.
More than 108,000 contracts changed hands in the four most
frequently traded names yesterday, roughly 10 times the average
amount. The activity was mixed, with bullish transactions in some
stocks and bearish trades in others.
Apollo Group saw the busiest and most optimistic order flow as
investors sold more than 8,700 November 40 puts for $0.70. There
was also buying in the October 55 calls and the October 60
The put selling reflects confidence that APOL will remain above
$40 through expiration, while the call activity indicates a
willingness to own the shares at higher levels. APOL rose 0.67
percent to $50.79 yesterday and is up 23 percent in the last month.
Our Heat Seeker monitoring system also detected bullish activity in
Corinthian Colleges, where buyers snapped up more than 12,000
October 7 calls for $0.40 to $0.60 against open interest of 5,432
contracts. Total options volume was 7 times greater than average in
the name, with calls accounting for 90 percent of the activity.
COCO rose 5.35 percent to $6.50. It was also the subject of heavy
call buying on Sept. 9.
The entire sector took a beating earlier in the year on concerns
that government officials would tighten student-lending rules,
threatening the main source of their revenue. APOL lost 39 percent
of its value between mid-April and mid-August, while COCO fell 63
percent. ITT Education Services and Career Education both shed 43
The activity in ESI and CECO was more mixed. In the former, traders
sold the October 60 puts and bought buying the October 70 calls,
while the latter saw both call buying and call selling, according
to optionMONSTER's data systems.
(Chart courtesy of tradeMONSTER)
Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.