Groupon Options (GRPN): Unusual Trading Activity

| May 14, 2012 | 0 Comments

GRPN OptionsOptions in e-commerce company Groupon (GRPN) are experiencing a large amount of trading activity today.

Even though the stock market has morning jitters, this is another big week for earnings announcements.

And earnings this week kick off after the close today with Groupon.

If you remember, last month GRPN stock took a huge beating of over 20% on allegations of accounting irregularities.  In addition, it guided lower for this quarter’s earnings.

Now sitting at an all-time low, option traders are finding value and positioning for a pop in the stock price on tonight’s earnings.

In fact, right after the open this morning, one trader came in and sold 3,500 contracts of the June GRPN $9 strike put options.

He sold these for a whopping $1.15 a share… a total credit of $402,500.

Remember, put selling is a bullish trade where an option trader needs the stock to stay at or above the strike price by expiration.  And that’s exactly what this trader is expecting.

So, all he needs to keep his entire premium is for GRPN to stay at or above $9 by June expiration.  For this trader to be incorrect, the stock would need to fall an additional 22% from its current price of $11.00.

The probability of that happening is not very high.

For those of you who don’t know, Groupon operates as a local commerce marketplace that connects merchants to consumers by offering goods and services at a discount in North America and internationally.

The company sends daily emails to its subscribers regarding discounted offers for goods and services that are targeted by location and personal preferences.

The reason for today’s large activity comes on the heels of tonight’s anticipated positive earnings announcement.

Also, the stock itself is carrying a very large short interest.  Meaning, there’s many traders that are short this name.

And the higher the short interest, the higher probability the stock gets squeezed.  In other words, if GRPN gets some good news tonight, the short sellers will be forced to buy their shares back.

As a result, the stock will automatically move higher due to increased buying activity.

We’ll see as we move into the close.

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Category: Unusual Options Trading Activity

About the Author ()

Marcus Haber is the co-editor of Options Trading Research and boasts well over a decade of real-life options experience. Learning from some of the biggest names in the business, Marcus has served as an Options Strategist for a number of firms and was also appointed to the Options Advsiory Board with Pershing, a branch of the Bank of New York.