Ratio Call Spread Play in Zimmer

A preponderance of bullish activity is seen today in options of ITT Educational Services (ESI - commentary - Cramer's Take), the for-profit vocational training franchise whose shares are up 3.8%, at $84.64. Nearly 80% of the active volume in the operator of ITT Technical Institutes is categorized as bullish, according to our data feed from Trade Alerts, and with options trading at more than triple the normal level, the volume speaks to a high level of conviction in sentiment, certainly compared to the level of activity normally seen in the company's options.

Opening buyers are looking at the $85 strike in December and January, paying fully $7.15 for the latter month's strike in a position that requires another 9% to the upside to break even. Our charting system from Interactive Brokers indicates that implied volatility on ITT Educational Services options has come off 56% from its October 10 highs, which means today's traders may have looked at the current volatility reading as an attractive entry point for a long options position and aren't afraid of a further contraction in implied volatility that would erode the value of those calls even more.

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Know What You Own: ITT Educational Services operates in the education and training services industry, and some of the other stocks in its field include Apollo Group (APOL - commentary - Cramer's Take), DeVry (DV - commentary - Cramer's Take), Strayer Education (STRA - commentary - Cramer's Take) and New Oriental Education & Technology Group (EDU - commentary - Cramer's Take). For more on the value of knowing what you own, visit TheStreet.com's Investing A-to-Z section.

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At the time of publication, Darst had no positions in the stocks mentioned.

Rebecca Engmann Darst is the Portfolio Manager for TheStreet.com?s Options Alerts Portfolio newsletter and an equity options analyst for RealMoney Each Thursday at 6:30 a.m. EST, she delivers the early-morning lowdown on option volume and sector trends on CNBC's "Squawk Box." Prior to her work in the equity options market, she spent seven years in Scandinavia as a Copenhagen-based chief reporter for a European Commission news service, correspondent for Spanish daily El Mundo and Radio Netherlands, followed by stints at Nordea Bank and Saxo Bank.