LRN $1.3M Put Purchase - Big Money Hedges Before Q1 Earnings!

📅 October 28, 2025 | 🚨 Massive Defensive Position Detected

🎯 The Quick Take

Someone just dropped $1.3 MILLION on Stride Inc (LRN) puts expiring November 21st! This massive trade bought 2,500 contracts at the $140 strike when the stock was trading at $152.77, paying $5.10 per contract. With Q1 FY2026 earnings dropping TODAY after market close, this looks like institutional hedging or a directional bet on post-earnings weakness. Translation: Smart money is buying insurance on this education tech rocket ship before the earnings announcement!

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📊 Company Overview

Stride, Inc. (LRN) is a leading online education technology company serving K-12 students:
- Market Cap: $6.7 Billion
- Industry: Educational Services
- Core Business: Online educational programs offering alternative to traditional on-campus schooling, operating state-funded virtual charter schools and providing K-12 curriculum programs across the United States
- Current Price: $153.53 (as of market close)

Stride operates through two primary segments: General Education (traditional K-12 online schooling serving 240,000+ students) and Career Learning (fast-growing career-focused programs in IT, healthcare, and business). The company has delivered exceptional performance with FY2025 revenue of $2.4B (+18% YoY) and is tracking ahead of ambitious FY2028 growth targets.

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💰 The Option Flow Breakdown

The Tape (October 28, 2025 @ 13:04:06):

Time	Symbol	Side	Buy/Sell	Type	Expiration	Premium	Strike	Volume	OI	Size	Spot	Option Price
13:04:06	LRN	MID	BUY	PUT	2025-11-21	$1.3M	$140	2.5K	237	2,500	$152.77	$5.10

🤓 What This Actually Means

This is a massive put purchase representing either portfolio hedging or a bearish directional bet! The trader:

• 🎰 Paid $1.3M in premium for protection below $140
• 📅 Expiration: November 21, 2025 (24 days away)
• 💵 Break-even: $134.90 ($140 strike - $5.10 premium paid)
• 🎯 Betting LRN drops below $134.90 by mid-November
• ⏰ Timing: Hours before Q1 FY2026 earnings announcement

Unusual Score: 🔥 EXTREME (472x average size) - This is unprecedented for LRN! This massive trade is 472 times larger than typical LRN option activity - representing the largest options position we've ever tracked for this ticker. The Z-score of 69 suggests this is truly outlier activity that happens perhaps once in the company's trading history.

The timing is fascinating - this expires just 24 days out, covering the critical post-earnings period. With the stock up substantially YTD and trading near highs, someone with deep pockets is either protecting a large equity position or betting on earnings disappointment. The strike at $140 represents 8.4% downside protection, suggesting expectations for either modest profit-taking or a significant post-earnings selloff.

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📈 Technical Setup / Chart Check-Up

YTD Performance Chart

Stride (LRN) has been on an impressive run throughout 2025! The stock has climbed from lower levels to current prices around $153, reflecting strong execution and growing investor confidence in the online education model. 📚

After extraordinary FY2025 results showing 18% revenue growth and 48% EPS growth, the stock has captured market attention as a play on the secular shift toward online and career-focused education. The company's Career Learning segment surged 26.4% in recent quarters, driving margin expansion and positioning Stride as a leader in education technology.

Key observations:
- 📊 Strong momentum: Trading at $153.53 with solid institutional support
- 💪 Growth story: Double-digit enrollment growth continuing (10-15% projected for FY2026)
- 🎢 Earnings catalyst: Q1 results today could drive significant movement
- 🏆 Market leadership: Outperforming traditional education stocks with tech-enabled model

Gamma-Based Support & Resistance Analysis

Current Price: $154.00

The gamma chart reveals critical support and resistance levels that tell the story of this trade:

🔵 Support Levels (Put Gamma):
- $150 (Strongest): 0.168M total gamma - Major support just 2.6% below current price
- $145: 0.331M total gamma - First major defensive line (5.8% down)
- $140 (THE TRADE STRIKE): 0.125M total gamma - Critical support at 9.1% downside
- $135: 0.104M total gamma - Secondary support floor (12.3% down)
- $125: 0.050M total gamma - Deep support for major correction (18.8% down)

🟠 Resistance Levels (Call Gamma):
- $155 (Immediate): 0.270M total gamma - Small hurdle just 0.6% above
- $160: 0.113M total gamma - First resistance at 3.9% upside
- $165: 0.095M total gamma - Next level at 7.1% upside
- $170: 0.184M total gamma - Major resistance zone (10.4% up)
- $175: 0.113M total gamma - Upper bound at 13.6% upside

📊 Gamma Verdict: Net GEX bias is BULLISH with total call gamma (1.087M) significantly exceeding put gamma (0.683M). However, the put buyer clearly expects some consolidation or pullback from current levels. The $140 strike represents a meaningful support level that would only be reached in a significant correction scenario - possibly after disappointing earnings or broader market weakness.

Implied Move Analysis

The options market is pricing in substantial potential movement across different timeframes:

📅 Monthly OPEX (November 21, 2025 - 24 days):
- Implied Move: ±11.77% ($18.06)
- Range: $138.15 - $176.98
- 👀 This PERFECTLY covers the earnings catalyst and post-earnings digestion

📅 Quarterly Triple Witch (December 19, 2025 - 52 days):
- Implied Move: ±13.18% ($20.23)
- Range: $135.70 - $180.73
- 🎯 Extended window for Q1 results and guidance impact

📅 Yearly LEAPS (September 18, 2026 - 325 days):
- Implied Move: ±55.30% ($84.89)
- Range: $68.61 - $238.39
- 🚀 Massive range reflecting uncertainty in long-term education trends

Key Insight: The 11.77% implied move for November OPEX suggests LRN could trade as low as $138 by expiration, which is BELOW the $140 put strike. The put buyer is betting on a move that falls within the expected range - specifically targeting the lower portion of the distribution. This isn't a lottery ticket; it's a calculated bet that earnings disappoint or the stock consolidates after its strong run.

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🎪 Catalysts

🔜 Upcoming Events

Q1 FY2026 Earnings - October 28, 2025 (TODAY After Close) 🎯

Wall Street expects another strong quarter with consensus EPS of $1.23-$1.26, representing 30.9% year-over-year growth from $0.94. Revenue estimates are $614.6-$616.5 million, up 11.5-11.9% year-over-year. Analysts have maintained their estimates over the past 30 days, indicating confidence in execution.

Key metrics to watch include:
- Enrollment growth: Management guided for 10-15% year-over-year growth - confirmation is critical
- Career Learning momentum: The high-margin segment that drove 32.5% enrollment growth in FY2025
- Full-year guidance: Any updates to FY2026 targets will drive the stock
- Operating margin trends: Gross margin expanded 180 bps in FY2025 but may moderate with increased AI and tutoring investments

Stride has beaten revenue estimates in every quarter over the past two years by an average of 3.6%, creating a strong track record. However, the stock has demonstrated average post-earnings returns of +10.6% by day 7, though this fades after day 26, suggesting typical "buy the rumor, sell the news" behavior.

FY2028 Target Timeline - Critical Validation Point 📊

Management set ambitious FY2028 targets including revenue of $2.7-$3.3 billion and EPS of $6.15-$8.35. Remarkably, Stride is tracking AHEAD of schedule on profitability metrics, potentially achieving the lower end of the FY2028 operating income target three years early. Each quarterly update provides validation (or challenge) to this long-term trajectory, making earnings announcements critical inflection points.

AI Integration Rollout - Ongoing Innovation 🤖

Stride is aggressively deploying artificial intelligence across its platform to enhance learning outcomes:
- Legend Library: AI-powered app using Stability AI in Amazon Bedrock creating personalized stories and images
- AI-Enhanced Tutoring: Embedding AI into K12 Tutoring service that conducted over 100,000 sessions in FY2025
- Minecraft Partnership: Curriculum-aligned virtual learning environments won 2025 Digital Game-Based Learning Product of the Year

These innovations differentiate Stride from traditional education providers and support premium valuations, but require continued investment that may pressure near-term margins.

✅ Recently Completed

Record FY2025 Performance 📈

Stride achieved another record year in FY2025 with total enrollments increasing 20.4% to 240,200 students. Financial highlights included:
- Revenue: $2.405 billion (+18% YoY)
- Adjusted operating income: $466.2 million (+59% YoY)
- Adjusted EPS: $8.10 (+48% YoY)
- Free cash flow: $372.8 million (up from $217.2 million in FY2024)

The Q4 FY2025 earnings beat on August 5, 2025, drove a 15.67% single-day stock surge, demonstrating the market's sensitivity to execution against high growth expectations.

Career Learning Segment Explosion 🚀

The Career Learning segment has become Stride's crown jewel, with Q3 FY2025 revenue growing 26.4% to $242.6 million and enrollment growth of 33.7% year-over-year. This segment now serves over 96,300 students in career pathways, benefiting from the secular shift toward non-college degree paths and vocational training. The segment's higher margins are driving overall profitability expansion.

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🎲 Price Targets & Probabilities

Based on gamma levels, implied move analysis, earnings catalyst, and recent growth momentum:

😰 Bear Case (35% probability)

Target: $130-$145 by November 21st

Drivers:
- ❌ Q1 earnings miss on enrollment or revenue guidance
- ❌ Management tempers FY2026 growth expectations due to funding uncertainty
- ❌ Accounts receivable concerns intensify (A/R surged 48% YoY to $700M in FY2025)
- ❌ Margin pressure from AI and tutoring investments exceeds expectations
- ❌ Valuation concerns at 25.8x P/E on near-term multiples
- ❌ Broader market correction hits high-growth education stocks

Key Levels:
- Break below $150 support triggers move toward $145
- $140 becomes critical support (THE PUT STRIKE) - defended by put gamma
- Implied move lower range of $138 represents base case downside scenario

Perfect Scenario for the Put Buyer: If LRN falls to $130, the puts would be worth $10 per contract ($1,000 profit per contract after subtracting the $5.10 premium paid). That's a 96% return on the $1.3M investment!

⚖️ Base Case (45% probability)

Target: $145-$160 range through November 21st

Drivers:
- ✅ Solid Q1 earnings meet expectations without major surprises
- ✅ Enrollment guidance of 10-15% growth confirmed for FY2026
- ✅ Career Learning momentum continues but moderates from 30%+ growth
- ✅ Stock consolidates after strong YTD run, digesting gains
- ✅ Institutional ownership remains strong at 98.24% providing support
- ✅ Analyst support continues with average price target of $150-167

Key Levels:
- Support holds at $150 (strongest gamma level)
- Resistance caps upside at $160 (call gamma wall)
- Trade range aligns with gamma support/resistance bands

Outcome for Put Buyer: If LRN trades between $145-$160, the puts expire worthless or with minimal value. The buyer loses most or all of the $1.3M premium paid. This is the most likely scenario - hedges often expire worthless by design.

🚀 Bull Case (20% probability)

Target: $165-$180 by November 21st

Drivers:
- ✅ Blow-out Q1 earnings with raised full-year guidance
- ✅ Acceleration in Career Learning enrollment beyond 30%
- ✅ New state contract wins or expansion announcements
- ✅ AI integration demonstrates measurable ROI on student outcomes
- ✅ Favorable education funding environment across multiple states
- ✅ Analyst upgrades following earnings (several have targets at $175-185)

Key Levels:
- Break through $160 resistance with volume
- Clear $170 level for momentum continuation
- Implied move upper range of $177 validates bull thesis

Worst Case for Put Buyer: If LRN surges to $180, the puts expire completely worthless and the buyer loses the entire $1.3M premium. This represents the opportunity cost of deploying capital in defensive positioning when the stock rallies.

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💡 Trading Ideas

🛡️ Conservative: Follow the Smart Money (Cash-Secured Put)

Play: Sell LRN November 21st $135 puts

Rationale: If big money is buying $140 puts, there's concern about downside. But selling puts at the next major gamma support level ($135) gives you extra cushion while collecting premium from the elevated post-earnings volatility.

Risk: $135 per contract max (if LRN goes to zero)
Reward: ~$2-3 premium per contract
Break-even: ~$132-133 (varies by entry price)

Why this works: You're positioned at secondary gamma support, get paid to wait through earnings, and would be happy to own LRN at an effective cost basis of ~$132 if assigned. The stock would need to fall 13.5% to reach this level - below even the bearish case target. Plus, you're selling insurance to people worried about a larger move than you think is likely.

⚖️ Balanced: Ride the Volatility (Iron Condor)

Play: Iron Condor around current levels (November 21st expiration)
- Sell LRN $165 calls
- Buy LRN $170 calls
- Sell LRN $140 puts
- Buy LRN $135 puts

Risk: $5 per spread max loss (width of wings)
Reward: ~$1.50-2.00 credit per spread
Sweet Spot: LRN closes between $140-165 (right in gamma bands)

Why this works: Captures elevated premium from both sides while defining risk at the key gamma levels. The gamma chart suggests $140-165 is the likely range post-earnings. You profit if LRN consolidates after its strong run - which is typical behavior after earnings when expectations are already high. The risk-reward profile (potentially 30-40% return on capital) compensates for the binary event risk.

🚀 Aggressive: Counter the Trade (Bull Call Spread)

Play: Bull call spread (November 21st or December 19th expiration)
- Buy LRN $155 calls
- Sell LRN $165 calls

Risk: ~$4-5 net debit per spread
Reward: $10 max profit (spread width)
Break-even: ~$159-160

Why this works: You're betting the whale is wrong (or just hedging) and that LRN delivers strong earnings with raised guidance. If Q1 results beat and Career Learning momentum continues, LRN could punch through $160 resistance. Historical post-earnings performance shows +10.6% average gains by day 7, which would put the stock at $169 - right at your short call strike. Risk is defined, and reward is 2:1. You're essentially betting on the continued growth story overwhelming near-term hedging concerns.

High Risk Note: This is a contrarian bet against a $1.3M institutional move. Only allocate 1-2% of portfolio max, and be prepared for binary earnings volatility!

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⚠️ Risk Factors

🎯 Earnings Execution Risk

This is a binary event with TODAY's Q1 results determining near-term direction. While Stride has a strong track record of beating estimates, the market's expectations are elevated following the exceptional FY2025 performance. Any miss on enrollment growth (the key driver), revenue guidance, or margin expectations could trigger sharp selling. The massive put purchase suggests someone with institutional-scale capital is concerned about downside.

💰 Valuation Premium vs Near-Term Fundamentals

LRN trades at a P/E ratio of 25.8x, which is elevated for the education services sector. This premium reflects high growth expectations, but creates vulnerability to any fundamental disappointments. The valuation requires continued execution on the 10-15% enrollment growth targets and Career Learning segment momentum. Any deceleration would likely trigger multiple compression.

📊 Accounts Receivable Concerns

A significant risk factor that emerged in FY2025: accounts receivable surged 48% year-over-year to $700 million, consuming $240.4 million in operating cash flow. This represents delays in cash collection from state education agencies and school districts. While not unusual in the education sector, accelerating A/R growth could signal funding challenges or collection issues that would impact liquidity and financial flexibility.

💻 Investment Intensity Pressures

While Stride is aggressively investing in AI-powered tools and tutoring services to differentiate its platform, these initiatives require significant capital and may pressure near-term margins. The FY2025 gross margin expansion of 180 bps is expected to moderate as these investments ramp. If the ROI on AI and tutoring doesn't materialize quickly, investors may question the capital allocation strategy.

📉 Post-Earnings Momentum Fade

Historical analysis shows Stride exhibits strong post-earnings returns of +10.6% by day 7, but this fades significantly after day 26. This "buy the rumor, sell the news" pattern suggests institutional investors often use earnings strength to exit positions, creating selling pressure within the November 21st option expiration window. The massive put buyer may be anticipating exactly this dynamic.

🏫 Regulatory and Funding Uncertainty

Changes in state education policy or federal funding priorities could materially impact enrollment and revenue. Online education remains subject to regulatory scrutiny in some states, and shifts in school choice policies could affect growth trajectories. Additionally, the company's dependence on state-funded contracts creates exposure to budget pressures and political dynamics at the state level.

⚔️ Competitive Pressure

While Stride maintains leadership in K-12 online education, competition is intensifying from players like PowerSchool, McGraw Hill, DreamBox Learning, and Amplify. Traditional school districts are also developing their own virtual learning capabilities post-pandemic, potentially limiting Stride's addressable market. The company must continue innovating (via AI and gamification) to maintain its differentiation.

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🎯 The Bottom Line

Real talk: This $1.3M put purchase is significant defensive positioning ahead of a critical earnings catalyst! Someone with institutional-level capital is paying $5.10 per contract for protection at $140, which represents 8.4% downside from current levels. That's not panic selling - it's calculated risk management or a directional bet on post-earnings consolidation.

The timing is critical: With earnings announcing TODAY after close, this trade was positioned in the final hours before the news. The buyer is either:
1. Hedging a large long stock position against disappointment
2. Making a directional bet that the stock pulls back after its strong run
3. Protecting gains after riding the education tech wave higher

The message: Smart money sees risk here - either from valuation (25.8x P/E), execution (can they hit 10-15% enrollment growth?), or technical setup (potential profit-taking after strong YTD performance). The gamma data shows limited support below $150, meaning a miss on earnings could trigger cascading selling down to the $140 strike.

If you own LRN:
- Consider trimming 10-20% into the earnings announcement to reduce risk
- Hold core position - the long-term education tech story remains compelling
- Watch Q1 enrollment growth closely - that's the key metric driving the valuation

If you're watching:
- Wait for post-earnings clarity before entering
- The $145-150 range could offer attractive risk/reward if there's consolidation
- Look for confirmation of the 10-15% enrollment growth guidance before buying

If you're bearish:
- The put buyer paid a lot for this protection ($5.10 premium)
- You could sell puts at $135 to collect premium with lower risk
- Or wait for a post-earnings bounce to enter bearish positions with better risk/reward

Mark your calendar: 📅
- October 28th (TODAY) - Q1 FY2026 Earnings after close (THE catalyst!)
- November 21st - Option expiration (24 days to see if the bet pays off)
- Throughout 2025-2026 - Track enrollment growth and Career Learning momentum

Final thought: A $1.3M protective position doesn't mean LRN is doomed - it means someone is taking insurance before a binary event. With the stock up substantially this year and expectations high, there's two-way risk here. If earnings beat and guidance is raised, the puts expire worthless. If there's any disappointment, that $140 strike could provide a floor. The smart play might be to let the dust settle post-earnings before taking big swings! 🎯

Disclaimer: Options trading involves substantial risk and is not suitable for all investors. This analysis is for educational purposes only and not financial advice. The unusualness score of 472x average size indicates this is an institutional-scale trade that individual traders should not attempt to replicate without proper risk management. Past performance doesn't guarantee future results. Always do your own research and consider consulting with a qualified financial advisor before making investment decisions.

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About LRN: Stride, Inc. is an American online educational company offering alternative programs to traditional on-campus schooling. It operates state-funded virtual charter schools across the United States, providing educational programs for K-12 students with virtual classroom environments. With a $6.7 billion market cap and 8,600 employees, Stride is a leading player in the educational services sector, benefiting from secular trends toward online learning and career-focused education pathways.