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Bears Hope to Maul Career Education

David Russell|Writer, OptionMonster
Sunday, 4 Mar 2012 | 5:54 PM ET

Career Education plunged last week, and the bears are looking for more losses.

OptionMonster’s real-time tracking system detected the purchase of 3,200 April 7 puts for $0.20 on Friday. Volume was more than five times open interest in the strike.

Put contracts lock in the price where investors can sell shares and can be used to hedge on a long position or to speculate on a share-price drop. They can provide significant leverage to the downside, but these puts will also expire worthless if Career Education’s stock fails to push lower over the next six weeks.

The company’s stock declined 4.98 percent to $8.20 on Friday, losing more than 30 percent of its value in the last week. Most of that move followed the release of quarterly results on Tuesday, when investors focused on continued enrollment declines despite profit beating expectations.

Career Education had traded below $7 in December and, based on Friday’s activity, traders apparently see it going back toward that level. Overall option volume was six times greater than average in the session, with puts outnumbering calls by 16 to 1.

—Russell has no positions in CECO.

Additional News: Herb Greenberg’s Gloomy Outlook for Career Education

Additional Views: Sell For-Profit Education Stocks: Jim Cramer

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David Russell is a reporter and writer for OptionMonster.

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