Groupon, Inc. (GRPN) Rally Riles Up Option Bulls

Groupon Inc (GRPN) has seen extreme levels of call buying recently

by

Published on Jan 22, 2015 at 1:31 PM
Updated on Apr 20, 2015 at 5:32 PM

Groupon Inc (NASDAQ:GRPN) is nearly 4% higher at $7.44, despite the lack of a clear catalyst. Not surprisingly, calls are running at nearly 1.8 times the expected intraday clip, and short-term contracts are in demand, per the stock's 30-day at-the-money implied volatility, which has popped 3.8% to 78%.

Along those lines, GRPN's February 7.50 call is seeing the most action, with more than 4,100 contracts on the tape. Based on data from Trade-Alert, a number of these positions are being bought to open. In other words, the traders expect the stock will extend its run higher, and finish atop $7.50 by the close on Friday, Feb. 20 -- when the front-month options expire.

Call buying has been a popular strategy in recent weeks. During the last 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), GRPN has racked up a call/put volume ratio of 20.54 -- higher than any other reading from the previous year. However, with nearly 19% of the stock's float sold short, it's possible some of these bets were initiated by short sellers seeking an upside hedge.

While Groupon Inc (NASDAQ:GRPN) has had a nice run today, it remains a long-term technical laggard. On a year-over-year basis, the security has tumbled 30%.

Daily Chart of GRPN since January 2014


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