One investor apparently thinks that ITT Educational Services will keep on running.
optionMONSTER's Heat Seeker tracking system detected the purchase of 5,250 April 80 calls in a single print for $3.70. At the same time, 2,405 April 70 calls were sold for $8, but volume was below open interest in that strike.
This suggests that a trader had made money by owning the April 70s and rolled the position to the higher strike. What's unusual about the transaction is that he or she more than doubled the number of contracts owned. As a result, instead of collecting a credit, the trader paid a debit of about $92,000.
The implication is that this trader is very bullish on the for-profit college operator, as the increased number of calls provides much more leverage to a big rally. But the trader also shifted to out-of-the-money calls, which means that if the stock doesn't move in the right direction, the entire position will expire worthless.
ESI rose 2.5 percent to $75.51 yesterday and is up 33 percent so far this year. The stock has been rebounding along with other education companies following a major selloff in 2010 and 2011. Its last three earnings reports have beaten expectations, though weak enrollment briefly hurt the stock in January. (See researchLAB for more)
Overall option volume was more than twice the average amount yesterday, with calls outnumbering puts by nearly 7 to 1.
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