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Groupon Inc (NASDAQ:GRPN) has enjoyed a stellar 2013, doubling in value to its present perch at $10.37 and outperforming the broader S&P 500 Index (SPX) by more than 90 percentage points. While some contingents remain unconvinced, options players have started to mount a bullish campaign.
During the last five trading days at the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE), option traders have bought to open 5,476 calls compared to just 1,051 puts, resulting in a call/put volume ratio of 5.21. Expanding the data to include the NASDAQ OMX PHLX (PHLX) and spanning back 10 weeks, the 50-day call/put volume ratio on Groupon has jumped to 2.10, from 1.40 on Aug. 1. In short, demand for long calls is on the rise.
In the front-month series, the September 9 and 10 calls have been in focus over the last two weeks, as open interest at these in-the-money strikes has grown by more than 4,000 contracts each. The majority of this action has been on the buy side as well; in fact, buy-to-open orders have outpaced sell-to-open requests by a margin of nearly 4-to-1 for the 9-strike call.
In turn, Schaeffer's put/call open interest ratio (SOIR) for GRPN has drifted to an annual low of 0.38. Among all options expiring in the next three months, there are more than 2.5 times as many calls open as puts. What's more, the short-term speculative crowd has not been this call-focused at any other point during the past year.
These call buyers -- along with any put buyers looking to bet on a pullback (or hedge their GRPN shares) -- have been able to buy in at a relative bargain. Schaeffer's Volatility Index (SVI) reading of 50% stands in the lowest 3% of all annual measures, signifying that short-term options are relatively inexpensive of late.
While the options crowd may be piling on Groupon's bullish bandwagon, there are still notable pockets of skepticism. Of the 21 analysts following the stock, for example, only three have awarded a rating of "buy" or better, leaving 17 tepid "hold" designations and a lone "strong sell."
Also, short interest still constitutes nearly 7% of the stock's available float. Short-covering activity has begun in earnest -- the number of shorted GRPN shares dropped by almost 27% over the last two reporting periods -- and has the potential to continue, further lifting the shares.
Groupon Inc (NASDAQ:GRPN) has been in consolidation mode since Aug. 8, when it gapped after earnings to $11.22, its highest level since June 2012. The shares are now hugging their 20-day moving average, along which the stock has traded since mid-March. Today, on the heels of announcing how it plans to compete with Amazon.com, Inc. (NASDAQ:AMZN), GRPN has added an additional 3.2% to land at $10.37.