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Option Clips: Groupon, World Wrestling Entertainment, and Mallinckrodt

Reviewing notable options activity on Groupon Inc, World Wrestling Entertainment, Inc., and Mallinckrodt PLC

by 4/7/2014 12:58 PM
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Two equities generating buzz on StockTwits today are daily deals website Groupon Inc (NASDAQ:GRPN) and wrestling concern World Wrestling Entertainment, Inc. (NYSE:WWE). Global pharmaceutical firm Mallinckrodt PLC (NYSE:MNK), meanwhile, is also attracting attention in the options pits. Here's a look at how traders have been aligning their speculative bets today.

  • Groupon Inc (NASDAQ:GRPN) is 7% lower at $7.26, bringing its year-to-date deficit to more than 38%. The equity's short-term options are in demand, as its 30-day at-the-money (ATM) implied volatility (IV) is 10.3% higher at 59.5%. Calls and puts are both in heavy rotation, with roughly 22,000 of the former and about 19,000 of the latter exchanged so far. The day's two most popular strikes are the April 8 call, where 12,054 contracts have traded -- 90% at the ask, indicating they were purchased. On the put side, sellers are swarming the January 2015 7-strike put, where 6,036 contracts have crossed the tape (99% at the bid price).

  • World Wrestling Entertainment, Inc. (NYSE:WWE) is taking a beating, down 20.7% at $22.23 due to a lackluster report on online subscriber growth. The stock's plunge has landed it on the short-sale restricted (SSR) list, and seems to have sent option bulls scrambling for the exits. Call volume is running at three times the intraday norm, with more than half the action centered on the out-of-the-money April 30 call. The majority of the calls crossed on the bid side and IV is on the decline, hinting at sell-to-close activity. Currently, WWE's Schaeffer's Volatility Index (SVI) sits at an annual peak of 124%, suggesting the security's short-term options are fetching pricey premiums, from a volatility standpoint.

  • Finally, Mallinckrodt PLC (NYSE:MNK) is 7.5% lower at $57.84 -- and also on the SSR list -- after the firm struck a deal to buy Questcor Pharmaceuticals Inc (NASDAQ:QCOR) for $5.6 billion, or $86.08 per share. MNK's 30-day ATM IV touched a fresh 52-week peak earlier today, and was last seen 2% higher at 45.5%. Overall options volume is trading at 67 times the normal intraday pace, with around 3,300 calls and 1,700 puts exchanged. One cautious options bull is betting on a rebound for MNK, establishing a bull call spread at the May 65 and 70 strikes. The goal is for MNK to climb back atop $66.40 (bought call strike plus net debit of $1.40), though profit potential is capped at $3.60 per pair of contracts (difference between strikes minus net debit), no matter how high MNK should rally atop $70. However, considering 14.5% of the stock's float is sold short, it's possible that a short seller implemented the spread to hedge against a short-term recovery.


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