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Groupon Bulls Go for a Hail Mary Ahead of Expiration

With the front-month series set to expire, GRPN bulls rolled the dice on a Friday rally

by 12/21/2012 10:16 AM
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The December options series expires after today's closing bell, but that didn't stop speculative players from adding a new batch of front-month bets on Groupon Inc (NASDAQ:GRPN - 4.63) in Thursday's session. A total of 2,168 contracts traded at the stock's December 5 call, with the majority changing hands closer to the ask price -- implying they were purchased. Open interest at this strike climbed overnight by 421 contracts, and data from the International Securities Exchange (ISE) confirms that a portion of these calls were bought to open.

Based on the option's volume-weighted average price (VWAP) of $0.11, those December 5 call buyers need GRPN to rally above breakeven at $5.11 (strike price plus VWAP) before today's session winds down. The shares closed at $4.79 yesterday, so last-minute call buyers were banking on a bounce of more than 6.7% in today's trading.

However, since the calls had so little time value left when they were purchased, the maximum risk is relatively modest. Even if GRPN tanks to zero by the close, the most these call buyers stand to lose is the initial premium paid of $0.11.

As it stands right now, it looks as though December 5 call buyers may, in fact, be swallowing some losses later today. At last check, GRPN is down 3.5% to trade at $4.63.


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