Option Activity
for
Career Education Corp. (CECO)



Rep. George Miller, D-Calif., on Thursday put Career Education's Corp.'s American Intercontinental University under a harsh spotlight during a hearing about higher education accreditation. American Intercontinental was accredited despite an oversight group expressing concerns the school had assigned too many credits to some classes. CECO eventually remedied the credit-hour situation, its accreditor says, but the Education Department's Inspector General still called for that agency to be disbanded. In the meantime, Rep. Miller says "aggressive business plans" may be at play, as students pay per credit. "All of a sudden, that unit becomes very important. We are now dealing with education, for profit," Miller says.

Options players responded to the news by jumping on the stock's options, with more than 21,900 contracts crossing the tape yesterday. This surge in volume was more than six times the equity's average daily trading volume of 3,498 contracts, according to data from WhatsTrading.com. Furthermore, roughly 95% of the volume changed hands on the put side.

CECO-option-june18,2010



Put trading has been on the rise toward the security recently. The International Securities Exchange (ISE) has reported 9.7 puts purchased to open for every one call purchased to open during the past 10 trading sessions. This ratio of puts to calls is higher than 95% of all those taken during the past 12 months, pointing to an increasing pessimism.

However, skepticism has room to grow on the shares. The ratio of SOIR is far from a pessimistic extreme, indicating that there is ample room for more bears to jump on the stock's pessimistic bandwagon, pressuring the stock even lower.

Furthermore, short sellers are adding to their pessimistic positions. During the past month, the number of CECO shares sold short increased by 2% to 9.75 million. This accumulation of pessimistic positions accounts for more than 15% of the company's total float. A continuation of this trend could result in a fresh wave of selling pressure.

Technically speaking, the shares are up more than 16% since the beginning of the year. However, the security has rolled over from its recent peak and is trending lower under its 10-day and 20-day moving averages. The equity has also fallen below its 10-week and 20-week trend lines, pulling them into a bearish cross.

CECO-JUNE18,2010



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