GRPN, VXX Options – Unusual Trading Activity – October 23, 2013

| October 23, 2013 | 0 Comments

Unusual Trading VolumeThis week we’re taking a look at unusual options trading activity in Groupon (GRPN) and iPath S&P 500 VIX Short-Term Futures ETN (VXX).

As many of you know, unusual options volume can be a valuable indicator as to what traders are thinking, and more importantly, where these stocks are heading in the short-term.

This is something professional options traders pay a lot of attention to, and for good reason…  Unusual options activity can “tip off” big moves in a stock, either up or down.

So let’s take a look at some ‘interesting’ activity that caught our eye this week:

Groupon (GRPN)

An interesting, bullish trade occurred this week in Groupon.

GRPN, the popular daily discount site, is currently trading for $9.71 per share.  The share price is 273% above the 52-week low of $2.60 and is 24% below 52-week high of $12.76.

The trade involved three options strikes expiring in December.  A call spread was purchased at the December 10/12 strikes (long the 10 strike, short the 12 strike).  Plus, puts were sold at the December 8 strike.  The trade was done 5,000 times for a net cost of $0.23.

Essentially, this a bullish trade which makes money if GRPN reaches $12 or higher by December expiration.  The short puts and the short calls (the upper strike of the call spread) are simply a way to reduce the cost of the long December 10 calls.

iPath S&P 500 VIX Short-Term Futures ETN (VXX)

Another huge trade hit the wire in VXX.

VXX, a widely used volatility ETN, is currently trading at $13.36.  It’s 6% above the 52-week low of $12.57 and 65% below the 52-week high of $37.73.

A block of 25,000 March 15 calls were sold for $1.55 while the March 15 puts were bought for $3.80.  A trade like this is often called a combination and provides a synthetic method for getting short the VXX.

Most likely, the trader is betting the VXX won’t see a significant, sustained spike over $15 for the next several months.  It could be that he or she believes the next government showdown will get resolved more quickly or without all the drama from this past episode.

More Options Ideas…

That wraps up this week’s unusual options trading and volume…

Keep in mind, there’s a lot more unusual options activity going on than what we discuss here.

We just try to bring you what we feel are the most significant ones– and the ones you might actually be able to make some money on!

So keep an eye on your email inbox… we have a lot more options trading ideas coming your way!

Yours in Profit,

Gordon Lewis

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Category: Unusual Options Trading Activity

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.