Why activity is jumping in education


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.

APOL 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 calls.

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 percent.

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)

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: APOL , CECO , COCO , ESI



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