Groupon, Inc. (GRPN) Traders Expect Post-Earnings Drop

Puts are popular ahead of Groupon Inc's (GRPN) earnings release tomorrow

by Josh Selway

Published on May 4, 2015 at 2:15 PM
Updated on Jun 24, 2020 at 10:16 AM

Ahead of the company's earnings release scheduled for after the close tomorrow, Groupon Inc (NASDAQ:GRPN) puts are crossing at an accelerated rate. Specifically, the contracts are crossing at four times the expected intraday volume, with heavy attention being paid to the weekly 5/8 6-strike put, where data suggests buy-to-open activity is taking place. These traders are expecting GRPN to fall below $6 by Friday's close -- when the contracts expire -- for the first time since late October.

Widening the sentiment scope reveals option traders have shown a preference for calls over puts during the past 10 weeks. For instance, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), GRPN has a 50-day call/put volume ratio of 8.02. This reading is only 8 percentage points from an annual bullish peak.

However, there's a chance some of this call buying isn't that bullish in nature, given the high short interest on the stock. That is, over 60 million GRPN shares are sold short, and it would take bearish traders over eight sessions to buy back, at average daily trading volumes. Therefore, there's a chance some of the recent call buying is short sellers hedging against upside in the underlying.

Groupon Inc (NASDAQ:GRPN) is gaining today, up 5.3% at $7.15. This is a change of pace from the stock's technical performance of late. Over the past two months, GRPN has underperformed the S&P 500 Index (SPX) by almost 16 percentage points.


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