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By Chris McKhann

Put selling is the theme of today's early option trading, and the action in Career Education (CECO) is high on the list.

CECO

Traders are selling puts to take advantage of the educational service stock's high implied volatility and the expectation of stable or bullish markets. We see put selling across a number of names, but one trade in CECO ins the biggest of this type of action so far.

A trader sold 6,800 of the October 17 puts for $0.15. This was against open interest of just 141 contracts on these out-of-the-money puts.

CECO is up 2.5 percent this morning, trading at $21.18. Shares have been trending lower since brushing $36 in April. They consolidated around $18 for the last month, anchored to that level until the end of last week which saw a strong push higher.

We do not see any corresponding trades in CECO that might be a hedge, so the puts appear to have been sold naked. That would make sense given how far out of the money they are.

Many hedge funds use such strategies, known as "selling nickels." But there is significant risk to the downside, as the most the trade can make is the $0.15 credit while the potential loss is $16.85.

Disclosure: No position

Source: Big Put Selling in Career Education