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Since early January, Groupon Inc (NASDAQ:GRPN) has been charting a path steadily lower under the weight of its 20-day moving average. In fact, year-to-date, the stock has shed 50% of its value. On Friday, the equity extended its run into the red, losing an additional 1.8% on the day to close at $5.88. However, this didn't stop option traders from betting on a quick rebound -- or maybe hedging against one -- for the online coupon concern.
By session's end, GRPN had seen about 13,000 calls cross the tape, compared to roughly 2,600 puts. The most active option was the weekly 6/6 6-strike call, where the majority of the 3,064 contracts traded did so at the ask price. Open interest rose the most of any strike over the weekend, making it safe to assume that new positions were purchased.
The out-of-the-money (OOTM) calls were scooped up for a volume-weighted average price (VWAP) of $0.13, making breakeven at this Friday's close $6.13 (strike plus VWAP), or one penny shy of where the equity's 20-day moving average is currently located. Gains are theoretically unlimited with each notch above this mark GRPN is sitting at Friday's close. Risk, meanwhile, is capped at the initial premium paid, should the stock expire south of the strike price at week's end.
Widening the scope reveals that Friday's call-skewed session was just business as usual for option traders. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day call/put volume ratio of 4.99 ranks in the 86th percentile of its annual range. Simply stated, calls have been bought to open over puts at an accelerated clip in recent weeks. However, with 14.7% of Groupon Inc's (NASDAQ:GRPN) float sold short, a portion of the recent call buying, particularly at OOTM strikes, could be at the hands of shorts hedging against any unexpected upside.