Round-Number GrubHub, Inc. (GRUB) Traders Bank On a Bounce

GrubHub Inc (GRUB) is being pressured by Yelp Inc (YELP) news


Published on Feb 10, 2015 at 2:55 PM
Updated on Apr 20, 2015 at 5:32 PM

GrubHub Inc (NYSE:GRUB) is feeling the heat on the heels of Yelp Inc's (NYSE:YELP) big announcement, down 1.8% this afternoon to trade at $38.36. However, a look at the data shows a number of option bulls are keeping the faith.

One of GRUB's most active strikes is the March 40 call. Traders appear to be initiating fresh long positions here, expecting the stock to reclaim its perch atop the round-number 40 strike by the close on Friday, March 20 -- when back-month options expire. The shares settled above this level as recently as last Friday, thanks to a well-received fourth-quarter earnings report.

Today's call-buying bias is simply business as usual in GRUB's options pits. The stock's 10-day call/put volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 6.28 -- with long calls outstripping puts by a more than 6-to-1 margin.

However, there may be an ulterior motive for these upside bets. Specifically, short interest on GrubHub Inc (NYSE:GRUB) spiked nearly 21% during the latest reporting period, and now makes up 7.7% of its float -- which would take about a week to buy back, at typical daily trading levels. In other words, some of the recent call buyers -- especially at out-of-the-money strikes -- may be short sellers hedging.

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