Pre-Earnings Bull Places Big Bet on Groupon, Inc. (GRPN)

One speculator expects Groupon Inc (GRPN) to topple $8 by tomorrow's close

Digital Content Group
Feb 12, 2015 at 1:56 PM
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Groupon Inc (NASDAQ:GRPN) is 1.2% higher this afternoon to trade at $7.67, ahead of tonight's highly anticipated earnings report. Options volume has spiked to seven times the amount typically seen at this point in the day, with the weekly 2/13 series garnering plenty of attention.

Digging deeper, Trade-Alert identifies one trader who's using options to wager on additional upside through tomorrow's close, when the series expires. Specifically, this speculator bought to open 8,000 weekly 2/13 8-strike calls, and simultaneously sold to open 12,000 weekly 2/13 9-strike calls, initiating a bullishly skewed ratio spread. Additionally, to help offset the cost of the 8-strike calls, the trader sold to open a total of 4,000 contracts at the weekly 6.50- and 7-strike puts.

This is a bold bet, given not only its size, but also GRPN's propensity to make big moves after earnings. Following the last eight quarterly reports, the stock has averaged a 17.6% single-session move, with three of the last four to the downside.

Ahead of tonight's event, options traders have generally been bearish toward Groupon Inc (NASDAQ:GRPN). The stock's 10-day put/call volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 0.41, in the 88th percentile of its annual range. Elsewhere, 19% of GRPN's float is sold short, which would take roughly seven sessions to cover, at typical daily trading levels.

 

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