Job Cuts Pressure Groupon Inc (GRPN), Option Bulls

Call buyers have targeted Groupon Inc (GRPN), despite its lackluster performance

Sep 22, 2015 at 10:55 AM
facebook twitter linkedin

Groupon Inc (NASDAQ:GRPN) announced its board of directors has approved restructuring efforts that will include roughly 1,100 job cuts, or 9.3% of its global workforce. The company hopes to invest its expected cost savings back into the business.

On the charts, GRPN is down 2.3% today at $4.07, after ending 2014 at $8.26. Moreover, the shares face a stiff level of overhead resistance at their 32-day moving average, located at $4.25. In other words, the stock's technical set-up is bleak.

That hasn't kept option traders from wagering on a major upside move. During the past 10 days, GRPN's out-of-the-money (OOTM) October 4.50 call has seen the second largest increase in open interest of any front-month strike. More ambitious yet, over 17,600 contracts reside at the deep OOTM October 5 call, and data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) indicates a majority of these positions have been bought to open in the past three months.

Echoing this optimistic bent is GRPN's Schaeffer's put/call open interest ratio (SOIR) of 0.17. This reading indicates call open interest outweighs put open interest by a more than 5-to-1 margin, among options with a shelf-life of three months or less. In fact, the stock's SOIR has never been lower in the past year, pointing to an extreme bias toward short-term calls over puts.

On the flip side, short interest levels remain high on Groupon Inc (NASDAQ:GRPN). Despite falling 16.2% during the latest reporting period, short interest still makes up almost 16% of the equity's total float -- or more than a week's worth of activity, at typical volumes. In fact, some of GRPN's recent call buyers -- especially those targeting OOTM strikes -- may be short sellers hedging their downside bets.

Minimize Risk While Maximizing Profits

There is no options strategy like this one, which consistently minimizes risk while maintaining maximum profits. Perfect for traders looking for ways to control risk, reduce losses, and increase the likelihood of success when trading calls and puts. The Schaeffer’s team has over 41 years of options trading success targeting +100% gains on every trade. Rest assured your losses are effectively limited to your initial cost at the time of making your move! Don't waste another second... join us right now before the next trade is released! 


300x250 - Banner 3 - v1