Options Trading News

Shares of DeVry fell before its earnings report last night, but a May three-way spread earlier in the day was looking for the education company's stock to move higher.

The option volume in DV topped 21,000 contracts compared to a daily average of just 480 in the last month. A trader bought 4,000 May 45 calls for $1.85, sold 4,000 May 50 calls for $0.65, and sold 8,000 May 30 puts for $0.70 all at the same time. The open interest at all three strikes had been less than 800, so this was a new combination spread.

DV closed at $39.7, losing 3.34 percent on the day. Shares were up against resistance at $42.50 for the last two weeks after running up from the 52-week low of $32.73 set on Dec. 14.

Earnings came out after the bell yesterday, and shares were down to $36 in after-hours trading.

The three-way spread was constructed to profit from a rise above $50, but it took in a small credit that will be kept if DV remains between $30 and $45. Despite its bullish nature, the position may not suffer too badly from the overnight decline because it can still profit from a drop in volatility, which will surely happen today.