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The shares of Groupon Inc (NASDAQ:GRPN - 6.70) have muscled 5% higher today, thanks to both a sector peer's earnings win and broad-market tailwinds. What's more, it looks like some options traders are expecting GRPN to extend its rebound over the next few weeks, with traders showing a relatively rare affinity for calls.
So far today, GRPN has seen about 2,600 calls change hands -- about double the number of puts exchanged. This call-bias runs counter to the recent trend seen on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), where GRPN sports a 10-day put/call volume ratio of 1.48. In other words, option buyers have scooped up more puts over calls during the past couple of weeks.
In today's session, option bulls have honed in on the August 7 call, which has seen more than 1,200 contracts cross the tape. The majority of the front-month calls have traded at the ask price, and implied volatility was last seen 2.9 percentage points higher, hinting at buy-to-open activity. By purchasing the calls to open, the investors are expecting GRPN to climb back atop the $7 level before options expiration in a few weeks.
However, in order for GRPN to achieve this, the stock would have to muscle north of its 10-day moving average. This trendline, along with its 50-day cohort, has rejected the security's rally attempts since mid-February, and ushered GRPN to a new all-time low of $6.35 just yesterday.
Plus, while puts have been popular during the past two weeks, calls still outnumber their bearish counterparts among short-term options, as evidenced by the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.80. In fact, the aforementioned August 7 strike is already home to nearly 10,800 calls outstanding -- which could translate into an added layer of options-related resistance in the near term.
Nevertheless, the out-of-the-money August 10 strike remains home to peak call open interest in the front-month series, with more than 15,000 contracts in residence. It's also worth noting that short interest skyrocketed by 55% during the past month, and now accounts for 16.7% of the stock's total available float. Against this backdrop, it's possible that short sellers picked up the out-of-the-money calls to hedge their bearish bets in the event of a near-term rally.
One reason the shorts might be a bit jittery is GRPN's looming earnings release. Specifically, the company is slated to unveil its second-quarter figures on Monday, Aug. 13. As alluded to earlier, the stock is enjoying a halo lift from sector peer LinkedIn (NASDAQ:LNKD), which wowed the Street with its own earnings and upwardly revised guidance last night.
On the other hand, many analysts remain devoted to GRPN's bullish camp. Despite its recent quest for new lows, or underperforming the broader S&P 500 Index (SPX) by 42 percentage points during the past 40 sessions, GRPN still boasts seven "strong buy" ratings, compared to 11 lukewarm "holds" and just one "sell" or worse recommendation. Plus, the consensus 12-month price target on the security stands at a lofty $16.97 -- more than double GRPN's current price of $6.51, and in territory the stock hasn't explored since late March.
From a contrarian standpoint, a pullback in the face of resistance, or a disappointing earnings showing, could leave GRPN vulnerable to downgrades and/or price targets, which could exacerbate the stock's year-to-date woes.