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April 12, 2013  Fri 5:16 AM CT

ESI: SEE CHART GET CHAIN FIND STRATEGIES
ITT Educational Services has been parked at long-term lows, but now the bears are getting nervous.

optionMONSTER's monitoring programs detected the purchase of about 2,500 May 15 calls for $0.45 and $0.50 yesterday morning. The volume was well above the strike's open interest of just 343 contracts before the session began, definitely showing that new money was being put to work.

Those long calls lock in the price where investors can buy shares in the massively shorted for-profit education stock, which can provide some nice leverage in the event of a rally. And that's what happened almost immediately yesterday.

ESI started working its way higher soon after the trades hit, erasing an early loss and closing higher by 6.11 percent at $13.71. But that gain was nothing compared with the move in the May 15 calls, which roughly doubled to $0.90 shortly before the close as another 2,600 contracts changed hands throughout the session. (See our Education section)

The company reports earnings before the bell two weeks from now on April 25. That means there is plenty of time for a potential short squeeze in the stock, which is back to levels last seen in early 2001.
 
Total option volume in the name was 28 times greater than average in the session, with calls outnumbering puts by 19 to 1.

(A version of this post appeared on InsideOptions Pro yesterday.)
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