Shares of Apollo Group (NASDAQ: APOL, Stock Forum) were up more than 6% Monday. The shares of the education company have remained near their 52-week highs ever since announcing better-than-expected earnings on January 8. Jim Cramer talked positively about the shares on his Lightning Round OT segment Friday, citing it as one of the only growth stocks left in the market. But despite the bullish sentiments, at least one investor was betting that the shares will not top 100 between now and February option expiration on Feb 20.
In the first two hours of trading Monday, over 10,000 APOL Feb 100 calls were sold, versus an open interest of 3,177. The sale prices ranged from 10 cents up to 20 cents with the stock trading around $83.85.That equated to an implied volatility of 45%, but as we have noted in this column before, when an option is this far out-of-the-money, it is more of a lottery ticket than a volatility play.
One of the things that is interesting about this trade is that as the day went on and shares of APOL rallied, the calls rallied as well, causing a loss for the seller. The calls closed the day at 35 cents, meaning that if we assume the average sale price was 15 cents, then the call seller was down a quick $200,000 on the day. This rally in the calls was all due to the increase in the stock from $83.85 at the time of the trade up to $86.11 at the close.
This call activity does not mean investors should run out and sell their shares. To the contrary, this could likely be one large investor that is willing to hold his shares, but thinks that if the stock gets to $100 at February expiration, they would be willing to sell by having them called away. Here at $86, the investor is willing to hold the shares, suggesting that at least APOL should hold these levels.