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Option Brief: Groupon Inc (NASDAQ:GRPN) options trading is occurring at a slower-than-usual pace today, but one strike garnering notable attention is the November 13 put. Volume at the strike consists of 2,900-plus contracts -- exceeding current open interest levels -- and implied volatility (IV) is 4.9 percentage points higher, suggesting the creation of new positions. What's more, the majority of the activity has occurred at the ask price, indicating the bulk of the trades are of the buy-to-open variety.
The volume-weighted average price (VWAP) for the soon-to-be front-month puts is $2.37. Consequently, for the put buyers to reach profitable territory, they need GRPN shares to be trading below $10.63 (strike price less VWAP) by November options expiration. Expressed differently, based on the stock's current post at $10.90, the speculators need the shares to shed at least 2.5% in order to profit. Delta on the put currently rests at negative 0.75, representing a 75% chance the option will remain in the money at option expiration. If instead Groupon surges beyond $13 by the closing bell on Nov. 15, the traders will lose their initial premium paid, assuming they're still holding onto their options.
No matter what happens, the most the put buyers have at stake is the original premium paid. However, it seems that sum has grown more expensive throughout the course of the session, as GRPN's 30-day, at-the-money IV was up 4 percentage points, or 5.3%, at last check.
Betting on Groupon Inc (NASDAQ:GRPN) to retreat (albeit slightly) appears risky, given the stock's recent history. Year-to-date, the shares have more than doubled in value. What's more, on a relative-strength basis, the couponing king has outperformed the broader S&P 500 Index (SPX) by nearly 29 percentage points during the past three months.
The put buyers may be banking on GRPN struggling on Thursday, Nov. 7, when it steps into the earnings confessional. For the current quarter, the average bottom-line analyst estimate is docked at 1 cent per share. The company has matched or exceeded Wall Street's earnings-per-share estimates in five of the previous seven quarters, however. And most recently, the stock surged 21.6% the day after its early August earnings report, as investors reacted to stronger-than-expected sales.
For in-depth analysis of Groupon Inc (NASDAQ:GRPN), visit our GRPN quote page, which contains links to recent commentary, charts, and sentiment indicators.