Options Trading News

June 27, 2013  Thu 4:14 AM CT

Apollo Group fell hard yesterday, but at least one large investor is attempting to bottom-fish the education stock.

optionMONSTER's Heat Seeker monitoring system detected the purchase of 9,000 November 22 calls for $0.90 and the sale of an equal number of November 15 puts for $1.02. Volume was more than triple open interest at each strike, indicating that new positions were initiated.

The transaction resulted in a credit of $0.12 and will provide long exposure to the beaten-down education company. The long calls will appreciate in value and the puts sold short will dwindle if the stock climbs, while the opposite will happen to the downside.

APOL fell 10 percent to $17.39 yesterday, gapping lower after quarterly profit and revenue missed expectations. It's now close to its 52-week low and a key consolidation area from 1998 and 2000, which could be leading some chart watchers to believe that it will bounce.

Thanks to the option strategy, yesterday's trader will make money if the shares stage a sharp rebound. He or she has also programmed a buy order at $15, well below its recent levels.

Alternatively, the investor might have been short APOL stock and could have used the position to lock in profits. (See out Education section for other risk-management practices.)

Total option volume was 18 times greater than average in the session, according to the Depth Charge. 
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