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Put volume was heavy on Groupon Inc (NASDAQ:GRPN) during Thursday's session, with approximately 20,000 contracts crossing the tape -- representing 1.90 times the stock's average daily put activity. The most active strike was the October 11 put, where 5,575 contracts were exchanged.
Taking a closer look at this front-month option, the bulk of the volume traded in a single block of 5,196 contracts. This block went off at the ask price of $0.32 around 2:21 p.m. ET, sending implied volatility up 1.3 percentage points. As such, it appears these GRPN puts were purchased. Based on this price of entry, the puts will be profitable at expiration if the shares are trading below breakeven at $10.68 (put strike minus premium paid). The stock is fractionally higher at $11.37 today, so these bears are looking for a slide of more than 6.1% over the next two weeks.
However, open interest at GRPN's October 11 put rose only modestly overnight, and the International Securities Exchange (ISE) confirms some buy-to-close activity at this strike during Thursday's session. In other words, a handful of speculators closed out their short puts on Groupon Inc (NASDAQ:GRPN) -- perhaps fearing the stock would slide below $11 prior to front-month expiration, and put them at risk of assignment.
Currently, though, the stock shows no signs of breaching this key support level. The $11 area acted as a ceiling during August and early September, but GRPN broke out above this roadblock on Sept. 9. Since then, the shares have tested and bounced from this region on several occasions. With the equity's supportive 40-day moving average also rising toward $11, this level could continue to provide a firm foothold for the shares going forward.
Groupon Inc (NASDAQ:GRPN) boasts a massive year-to-date gain of nearly 134%, but sentiment toward the daily deals site is far from euphoric. Short interest still accounts for almost 6% of the stock's float, and 16 out of 21 analysts maintain a "hold" or "strong sell" rating on GRPN. An unwinding of short interest or a round of upgrades -- such as the Sept. 19 bullish note from Stifel Nicolaus -- could help propel the shares even higher.
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