Groupon Options (GRPN): Unusual Trading Activity

| April 3, 2012 | 0 Comments

GRPN OptionsOptions in troubled company Groupon (GRPN) experienced a large amount of unusual trading activity yesterday.

If you’ve turned on any business TV show in the last few days, you’ve heard about Groupon.  This company’s stock hit a high Friday of $18.98.  It closed at the end of today’s trading session at $15.27.

Taking a beating of just under 20%.

However, experienced option traders take a stock like GRPN sitting at all-time lows and weigh whether it’s time to jump in or abandon ship.

One trader Monday decided it was time to jump in.  And jump in big!

As Groupon fell sharply, this trader believes Groupon’s stock is finished falling for the year.

According to our tracking system, he sold 7,000 January 2013, $13 strike put options for an average price of $2.50.  This represents 5 times the amount of contracts currently open on this particular strike.

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.

The total premium he collected on his 7,000 contracts of Groupon was a cool $1,750,000.  All he needs to be a very happy camper and keep all of that premium is for GRPN to stay at or above $13 by January’s 2013 expiration.

Although I agree with the attractive premiums that were collected, I don’t think Groupon will stay above the $13 stock price.

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 yesterday’s large activity was because the SEC said that Groupon must restate its last quarterly results.

Apparently, GRPN has been artificially inflating their revenue numbers in a questionable manner.

And as we know, when it comes to accounting irregularities, it could be a long time before the stock recovers.

In fact, a few analysts were quoted yesterday saying they see many more bumps in the road ahead for Groupon.

Tough to question that, but I hope this option trader is correct.

For more detailed information on unusual options activity and how you can profit from it, be sure to sign-up for our daily newsletter, Options Trading Research.  It’s always 100% free and packed full of option trading ideas you can use immediately in your own portfolio.  Click here to subscribe for free.

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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.