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Options Radar: Groupon Inc, El Pollo Loco Holdings, and Arcos Dorados

Reviewing notable options activity for Groupon Inc, El Pollo Loco Holdings Inc, and Arcos Dorados Holding Inc

by 8/4/2014 1:15 PM
Stocks quoted in this article:

Three stocks seeing notable options activity today are daily deals site Groupon Inc (NASDAQ:GRPN), quick-service restaurant chain El Pollo Loco Holdings Inc (NASDAQ:LOCO), and South American McDonald's franchisee Arcos Dorados Holding Inc (NYSE:ARCO). Here's a look at how today's options traders have been placing their bets on GRPN, LOCO, and ARCO.

  • Option volume has ramped up to seven times the intraday norm on GRPN, with approximately 51,000 calls and 39,000 puts changing hands so far. The most active strike is the stock's August 6 put, where nearly 12,000 contracts have been exchanged, and data from the International Securities Exchange (ISE) suggests new puts are being bought to open here.

    This flurry of activity precedes Tuesday night's second-quarter earnings release from Groupon Inc, with the options market currently pricing in a 27% post-earnings move for the shares. That wouldn't be totally out of the question for GRPN; over the last eight quarters, the stock's one-day post-earnings price action has ranged from a gain of 21.6% (in August 2013) to a loss of 29.6% (in November 2012). At last check, GRPN shares are up 8.4% at $7.01.

  • LOCO is off 6.3% this afternoon to trade at $38.60, and it seems the Wall Street newcomer's short-yet-volatile history is making speculators a little wary of newly available options. So far, only about 1,000 calls and 766 puts have changed hands on El Pollo Loco Holdings Inc. The most active strike is LOCO's August 35 put, where 513 contracts have crossed the tape. Implied volatility on this out-of-the-money option currently stands at 115.6%, compared to only 65.2% for the August 35 call. This volatility skew is reflected across the board on LOCO's options, suggesting traders are bracing for a pullback in the weeks ahead.

  • Buenos Aires-based ARCO is tentatively expected to report earnings this week, as Argentina attempts to battle reports that it's in default. In the options pits today, put volume on Arcos Dorados Holding Inc has spiked to 10 times the usual intraday level, with 2,043 contracts exchanged. All but 43 of those contracts traded at ARCO's August 11 put, where implied volatility has jumped 3.1 percentage points to 59.4%. With ARCO shares down 2.4% this afternoon to trade at $10.01, those front-month contracts are trading at a volume-weighted average price of $1.15.

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