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It's a mixed bag of speculative activity on Groupon Inc (NASDAQ:GRPN) today, as the stock digests some of its recent gains. Call volume and put volume are currently running neck and neck, but today's put activity represents a 58% mark-up over what's typically seen on an intraday basis. GRPN has gained roughly 95% in 2013, but is off 1.1% today at $9.49, prompting some options traders to target more downside, while more optimistic bettors are hoping to buy on the dip.
Most active across all strikes is the weekly 8/23 9-strike put, where roughly 4,700 contracts have traded, versus open interest of just 200. Implied volatility has spiked nearly 11 percentage points at the strike, and the majority of the options traded at the ask price, suggesting put-buying activity. Given the volume-weighted average price (VWAP) of $0.12, these are bets that GRPN will be trading south of $8.88 (strike less the VWAP) at Friday's closing bell, when these short-term puts expire. Currently -- per the option's delta of negative 0.21 -- the options market is pricing in a slightly better than 1-in-5 chance the put will expire in the money.
Turning to the call side of the fence, the most heavily traded contract today is the January 2014 10-strike call. The lion's share of the nearly 3,700 contracts on the tape changed hands at the ask price, and implied volatility is moving higher, which is suggestive of buy-to-open activity. Assuming the VWAP of $1.29, breakeven on these options (when expiration rolls around in five months) is $11.29. This is a chip shot away from the stock's 52-week high of $11.22, tagged on Aug. 8 following a well-received earnings report.
From a broader perspective, the options crowd has been reluctant to choose sides on Groupon. The equity's 10-day put/call volume ratio of 0.37 ranks in the 55th annual percentile. In other words, although calls have been bought to open at a roughly 5-to-2 margin over puts, the ratio itself is quite average, versus other readings from the past year.
Analysts, on the other hand, are still notably skeptical. Of the 21 brokerage firms following the stock, just three name GRPN a "buy" or better, leaving 17 lackluster "hold" designations and one outright "strong sell." What's more, the consensus 12-month price target of $11.32 is just a dime north of the recently pegged annual peak. Any shifts in opinion among the Wall Street contingent could provide a contrarian tailwind for GRPN moving forward.
There is seemingly no time like the present to scoop up GRPN options, whether they are bullish or bearish in nature. Schaeffer's Volatility Index (SVI) reading of 49% is lower than all but 2% of the past year's readings, indicating that short-term options are priced more cheaply than usual. Since Aug. 7, which was earnings eve, Groupon's 30-day in-the-money implied volatility (IV) measure has plunged from 99.7% to Friday's reading of 47.7%, near new-annual-low territory. Today, as demand from Groupon Inc (NASDAQ:GRPN) options has reignited, this IV reading is up more than 4 percentage points to 51.9%.