U.S. Markets open in 2 hrs 20 mins

Education names go to head of class

Mike Yamamoto (mike.yamamoto@optionmonster.com)

For-profit education companies have been beaten down in recent years, but traders are turning bullish on them again as their stocks attempt to make a comeback.

optionMONSTER's Heat Seeker system detected the purchase of 2,823 June 3 calls in Corinthian Colleges as premiums rose from $0.05 to $0.20. This is fresh buying, as the volume was well above the strike's open interest of 730 contracts before the session began.

The Heat Seeker also found heavy buying in more than 2,400 June 3 calls in Career Education for $0.35 to $0.45. That volume was also far above the previous open interest of 587 contracts, indicating new activity.

The long calls are betting that both names will be trading well above $3 by the time the contracts expire in five weeks. These options lock in the price where traders can buy the stock no matter how far it might rise. (See our Education section)

COCO surged 12.81 percent on Friday to close at $2.73, while CECO jumped 10.79 percent to $3.08. Both stocks have broken out of their respective ranges in recent weeks, rising above some key technical levels.

Total option volume in Corinthian exceeded 6,000 contracts, 6 times its daily average for the last month, with calls outnumbering puts by 5.5 to 1. Career Education saw more than 5,000 contracts change hands, 23 times its daily average, as calls outpaced puts by 29 to 1.

Our researchLAB market-analysis service showed that education names were the top gainers in Friday's session, as shown on the screen shot at right. The group was up 7 percent on the day and more than 31 percent in the last month.

More From optionMONSTER