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Can Groupon Inc. (GRPN) Barrel Through Recent Resistance?

Calls remain the options of choice among GRPN speculators

by 2/8/2013 10:54 AM
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The shares of Groupon Inc (NASDAQ:GRPN - 5.39) are enjoying a halo lift this morning, fueling accelerated call activity in the options pits. Within the first 90 minutes of the session, the daily deals concern has seen about 7,700 calls change hands -- almost double its average intraday call volume. For comparison, just over 2,500 GRPN puts have exchanged.

Most popular has been the July 5.50 call, which has seen close to 5,400 contracts traded on open interest of fewer than 1,900 contracts, pointing to an influx of new initiations. A healthy portion of the near-the-money puts have crossed at the ask price, suggesting they were purchased. More specifically, the calls traded at a volume-weighted average price (VWAP) of $0.86, meaning the buyers will make money if GRPN conquers the $6.36 level (strike plus VWAP) by mid-July, which encompasses the company's earnings release later this month.

In order to achieve this feat, the shares of GRPN would need to rally roughly 18% from current levels, and into territory not charted since mid-August -- before the stock's bearish gap. More recently, the equity has been stagnating beneath the $5.50 region, which has emerged as a technical speed bump in 2013. However, even if GRPN remains in its recent trading range, the most the call buyers can lose is the premium paid at initiation.

Today's preference for calls merely echoes the growing trend, as speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open more than 16 GRPN calls for every put during the past two weeks. In fact, the stock's 10-day call/put volume ratio of 16.10 stands just 1 percentage point from a 52-week peak, suggesting option players are initiating bullish bets over bearish at a near annual-high clip.

At last look, GRPN has added 1.8% to explore the $5.39 vicinity, trekking higher along with sector peer Linkedin Corporation (NYSE:LNKD).


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