Options Bulls Can't Get Enough of Groupon, Inc. (GRPN)

Sentiment remains favorable in Groupon Inc's (GRPN) options pits


Published on Jan 14, 2015 at 11:09 AM
Updated on Apr 20, 2015 at 5:32 PM

Groupon Inc (NASDAQ:GRPN) headed south out of the gate this morning -- and was last seen 0.8% lower at $7.42, despite a price-target hike to $8 from $6.50 at Credit Suisse. Activity has once again picked up in the stock's short-term options pits, with GRPN's 30-day at-the-money implied volatility jumping 10.8% to 81% -- in the 95th percentile of its annual range.

On a closer look, it seems speculators are keeping a bullish stance on GRPN, despite today's negative price action, with calls outpacing puts by a more than 8-to-1 margin. In the lead by a mile is the weekly 2/6 7.50-strike call, where over 1,200 contracts have been exchanged -- roughly four times as many as the next closest strike. It appears most of these contracts have been bought to open, meaning traders are looking for the stock to eclipse the $7.50 level by the close on Friday, Feb. 6, when the weekly contracts expire.

This preference for calls is nothing new for GRPN speculators. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day call/put volume ratio of 15.94 is higher than all similar readings from the past 52 weeks.

On the charts, Groupon Inc (NASDAQ:GRPN) has outperformed the broader S&P 500 Index (SPX) by almost 14 percentage points in the last three months. At the moment, though, nearly 19% of GPRN's float is controlled by short sellers, accounting for over a week's' worth of buying power, at its average daily pace of trading. However, short sellers have begun to jump ship, and during the last two reporting periods, short interest dropped roughly 13%. Should GRPN resume its uptrend, it could see tailwinds if bears continue to hit the exits.

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