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Option Brief: Groupon Inc (NASDAQ:GRPN) call volume is running at a 75% mark-up to the intraday average this afternoon, while put volume is relatively negligible. Meanwhile, the stock's 30-day at-the-money implied volatility has edged higher, indicating growing demand for short-term options.
Nevertheless, most active by a mile is GRPN's longer-term October 7 call, where nearly 15,100 contracts -- including a block of 12,647 -- are on the tape. The lot traded near the bid price, and volume outstrips open interest, making it safe to assume the out-of-the-money calls were sold to open.
By writing the calls to open, the trader is banking on GRPN -- up 2.4% today at $5.73 -- remaining south of $7 through October options expiration. If that happens, the calls will expire worthless, and the seller will retain the initial premium collected as his profit. If, instead, the shares rally north of the strike -- a level not explored since early May -- the trader risks being assigned.
Taking a step back, Groupon Inc (NASDAQ:GRPN) has struggled on the charts in 2014. Specifically, the shares have shed more than half of their value, and continue to face overhead pressure in the form of their 20-day moving average, currently located at $5.94.