Options Trading News

March 27, 2013  Wed 12:08 PM CT


Some traders think the bearish momentum is finally ready to shift in Apollo Group.

The for-profit education stock has lost more than two-thirds of its value since the beginning of last year, but has been trying to work its way higher since early March. It leapt on Monday in the wake of a strong earnings report before pulling back yesterday and today.

Today the options activity is turning bullish. Our Heat Seeker trade scanner shows unusual activity in the May 20 call, with almost 5,800 contracts purchased against open interest of 3,370. Almost all the large blocks priced for $0.34.

Those calls lock in the price where investors can buy shares, which will result in some big leverage on a percentage basis if the stock goes higher. For instance, a 25 percent move to $21.45 would result in a profit of more than 300 percent. The benefit of the strategy is that it provides upside exposure cheaply, limiting the amount of money that can be lost if the stock doesn't rise. (See our Education Section.)

APOL is down 3.15 percent to $17.20 in afternoon trading. Its recent low around $16 was its cheapest price since early 2000. Total option volume is quadruple the daily average so far today, according to Heat Seeker.

Calls outnumber puts by a bullish 6-to-1 ratio.

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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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