Friday, July 15, 2011

Apollo Group (APOL) - Large Nov Trade Bets to the Upside

APOL is trading $49.17, up small with IV30™ down 2.0%. The LIVEVOL® Pro Summary is below.


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Apollo Group, Inc. (Apollo Group) is a private education provider. The Company offers educational programs and services both online and on-campus at the undergraduate, master’s and doctoral levels through its wholly owned subsidiaries, The University of Phoenix, Inc. (University of Phoenix); Institute for Professional Development (IPD); The College for Financial Planning Institutes Corporation (CFFP), and Meritus University, Inc. (Meritus).

This is a report based on a single large print in Nov. The company has traded over 32k contracts on total daily average option volume of just 9,376. 30k of the contracts went up in one print:

cust bot 10,000 nov 50c
sld 10,000 nov 60c
sld 10,000 nov 45p
paid .48 vs sld 630,000 shrs @ 49.15

So, in English, someone bought a 50/60 call spread and sold the 45 puts to fund it. The stock is a hedge, likely for the MM not necessarily the initiator. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the calls and puts are mostly opening (compare OI to trade size).

The Skew Tab snap (below) illustrates the vols by strike by month.

I've included Nov, alone, and circled the strikes that were traded. The skew hasn't moved as I see it. Overall, the Nov vol is up a half of a vol point and the shape of the skew is as "normal" looking as I've seen -- almost the apotheosis of normal skew. Frustrating, as there don't seem to be any good skew scalps.

Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).

The for-profit education stocks can move, and APOL is certainly in that group. We can see on 6-2-11 it popped more than $4 ("The for-profit education sector rallied strongly Thursday after the Department of Education issued new regulations for schools that were not a strict as investors had feared." Source: AP). Then, on 6-30-2011 it popped almost $3 on an earnings release.

The 52 wk range is [$33.75, $53.61], and the Nov bet is a bullish one. It wouldn't surprise me if this is positioned to another Congressional hearing or ruling, but I don't actually know. It will be interesting to see if similar bets come on for the rest of the peer group: ESI, EDU, EDMC, CECO, etc.

This is trade analysis, not a recommendation.

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