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Groupon Inc (GRPN) Call Buyers Eye Additional Upside

A pair of weekly strikes is being targeted in Groupon Inc's options pits

by 6/23/2014 2:25 PM
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Option Brief: Groupon Inc (NASDAQ:GRPN) is soaring this afternoon, tacking on 5.5% to trade at $6.49. Helping the shares as they attempt to rebound from annual-low territory is a note from one Piper Jaffray analyst, who predicted steady growth in the number of deals the site will offer in the years ahead. Meanwhile, calls are trading at nearly three times the usual intraday pace, and short-term contracts are seeing increased attention, as the stock's 30-day at-the-money implied volatility is 11.6% higher at 51.4%.

Digging deeper, short-term speculators are target GRPN's weekly 6/27 6.50- and 7-strike calls this afternoon. Both contracts are seeing buy-to-open activity, and are being scooped up at a volume-weighted average price (VWAP) of $0.14 and $0.03, respectively. In other words, those buying the lower-strike calls anticipate the equity will advance north of $6.64 (lower strike plus VWAP), while those scooping up the higher-strike calls are targeting a move above $7.03 (higher strike plus VWAP) by Friday's closing bell, when the weekly options expire.

Gains are theoretically unlimited north of the aforementioned breakeven marks, while the most either set of call buyers has on the line is the initial premium paid, should the corresponding contracts finish out of the money. One final note: Due to Groupon Inc's (NASDAQ:GRPN) high levels of short interest (i.e., 15.5% of the equity's float is sold short), a portion of the deep out-of-the-money call buyers may intend their contracts as short-term upside protection.


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