Career Education (NASDAQ:CECO) is a provider of private, for-profit, post-secondary education in the United States, Canada, France, the United Kingdom and the United Arab Emirates. The company's schools offer degree and diploma programs within its core curricula of business studies, culinary arts, information technology, visual communication and health education.
Career Education also offers online education programs through its Online Education Group, which includes American InterContinental University Online and Colorado Technical University Online.
CECO was one of our bullish MCM Portfolio candidates in January and although the position expired profitably, we decided to close the spread early in the interest of prudent money management. The decision to revisit this stock from a bearish stance is based on the company's recent post-earnings slump, which has pushed its share value below a near-term trading range ($36-$42), and a subsequent downgrade by J.P. Morgan that may lead to further downside activity in the coming month. From a technical viewpoint, any additional selling pressure should signal the beginning of a new downtrend. But, even with a resumption of the lateral trend, there is significant overhead supply near the sold (call) strike at $40.
PLAY (conservative - bearish/credit spread):
BUY CALL MAR-45.00 CUY-CI OI=3122 ASK=$0.15
SELL CALL MAR-40.00 CUY-CH OI=3383 BID=$0.45
INITIAL "NET-CREDIT" TARGET = $0.35-$0.40
POTENTIAL PROFIT (X 5 contracts) = $175
RETURN ON INVESTMENT (max) = 7.5%
COST BASIS = $40.35
LOSS-LIMIT/EXIT POINT = $39.00 (cons) - $40.75 (aggr)