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Groupon Bulls Bank on a Continued Rebound

Traders took an interest in February calls on GRPN

by 1/8/2013 10:01 AM
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Call volume was unusually heavy on Groupon Inc (NASDAQ:GRPN - 5.36) yesterday, with approximately 17,000 contracts crossing the tape -- representing 1.17 times the norm. By contrast, fewer than 3,900 puts were exchanged on GRPN during the course of Monday's session, falling short of the stock's average daily put activity of 5,349 contracts.

The most heavily trafficked strike was the February 6 call, where 4,798 contracts changed hands. Nearly all of these calls traded closer to the ask price, suggesting they were purchased, and open interest rose overnight by 3,883 contracts. In other words, it looks like new bullish bets were bought to open at this overhead strike on Monday.

Those February 6 calls traded at a volume-weighted average price (VWAP) of $0.36, so option buyers need GRPN to rally above breakeven at $6.36 (call strike plus VWAP) before the close of trading on Friday, Feb. 15, when these contracts are due to expire.

Traders could be looking ahead to GRPN's upcoming earnings report, with the daily deals site tentatively scheduled to report its fourth-quarter results in early February. The company has managed to top Wall Street's consensus bottom-line estimates in three of the past four quarters, and analysts are currently looking for a fourth-quarter profit of 3 cents per share.

On the charts, GRPN has staged a significant comeback from its mid-November lows near $2.60, with the equity's rebound highlighted by support at its rising 10-day and 20-day moving averages.


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