ITT Educational Services, Inc. (ESI) Puts Pick Up Amid SEC Charges

ITT Educational Services, Inc. (ESI) has drawn the ire of the SEC

May 12, 2015 at 1:50 PM
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ITT Educational Services, Inc. (NYSE:ESI) is taking it on the chin today, down 36.4% at $2.56 -- and fresh off an all-time low of $2.07. The catalyst behind the stock's implosion is news that the Securities and Exchange Commission (SEC) has filed fraud charges against the company and a pair of top executives. In fact, trading on the shares -- which have been placed on the short-sale restricted list, attracting the interest of put traders -- was halted briefly this morning.

As alluded to, ESI puts have been popular today. By the numbers, 12,000 contracts have changed hands -- 20 times the usual intraday clip, and nearly four times the number of calls on the tape. This preference for puts over calls has been on display for the past couple weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Specifically, ESI's 10-day put/call volume ratio of 3.66 ranks in the 91st percentile of its annual range, meaning traders have bought to open puts over calls at an accelerated clip recently.

Echoing this is the security's Schaeffer's put/call open interest ratio (SOIR) of 0.69, which is higher than 64% of comparable readings from the past year. Stated differently, speculators targeting ESI options with a shelf-life of three months or less have preferred puts -- relative to calls -- by a greater-than-usual margin.

Negativity toward ITT Educational Services, Inc. (NYSE:ESI) has spilled beyond the options pits, as well. An astonishing 61.8% of the equity's float is sold short, which would take more than four weeks to repurchase, at the security's average daily trading volume.
 

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