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Bullish Bettors See a Rebound for Green Mountain Coffee Roasters

GMCR's January 45 calls have been popular in today's action

by 12/28/2012 12:14 PM
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Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR - 40.36) has been targeted by short-term call buyers today, as traders are scooping up the stock's front-month contracts.

So far today, GMCR has seen about 8,600 calls cross the tape, versus the roughly 5,600 GMCR puts exchanged. Attracting notable attention are the January 2013 45-strike calls, which have seen around 2,500 options change hands. The majority of the calls traded at the ask price, and implied volatility was last seen almost 1 percentage point higher, suggesting new positions are being initiated here today. By purchasing these calls, speculators are looking for GMCR to find its way atop $45.56 -- the strike plus the volume-weighted average price (VWAP) of $0.56 -- by Jan. 18.

Today's optimistic betting might appear to be a tall task for GMCR, but a closer look at the charts reveals an impressive rebound is in the works. On a relative-strength basis, the stock has outpaced the broader S&P 500 Index (SPX) by 81 percentage points during the past three months. Taking a step back, the coffee maker has rallied some 136% from its 2012 low of $17.11 (tagged on July 23). What's more, after a bullish gap on Nov. 28, the shares leapt atop their 200-day moving average for the first time since mid-October 2011.

Elsewhere on Wall Street, short sellers seem to be loosening their bearish grip on GMCR. Although short interest fell 22.5% during the past two reporting periods, it still accounts for a significant 33% of the security's available float. In fact, it would take almost six sessions for these bearish bets to unwind, at the stock's average pace of trading. Against this backdrop, it's possible that the out-of-the-money call buying is attributable to hedging activity among the shorts.


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