Learn the trade here. Make it on tradeMONSTER

Options Trading News

October 23, 2013  Wed 3:16 AM CT

GRPN: SEE CHART GET CHAIN FIND STRATEGIES
Groupon fell yesterday, and traders bought the pullback in an unusual three-way strategy

optionMONSTER's Heat Seeker monitoring program detected the purchase of 5,000 December 10 calls for $0.96. Equal-sized blocks were sold in the December 8 puts for $0.35 and the December 12 calls for $0.38, translating into a net cost of $0.23.

The position will expand to $2 if GRPN closes at or above $12 on expiration--a profit of 770 percent from the e-commerce stock moving just 22 percent. It also stands to lose money below $8 because the investor wrote puts at that level. (See our Education section)

GRPN ended the session down 6.98 percent to $9.86 after ITG Investment Research cited weakening sales trends. The stock has lost 22 percent of its value in the last month, but more than quadrupled between November 2012 and mid-September.

Traders may also be willing to write puts at the 8 strike because GRPN consolidated above that level in July and August. The next earnings report is scheduled for Nov. 7.

Total option volume was 7 times greater than average in the session, according to Heat Seeker.
Share this article with your friends


Related Stories

GRPN

Groupon bulls looking for a bounce

April 11, 2014

The online-deal company is down 38 percent in the last three months, much of that drop coming after management warned that it would sacrifice profit margins to increase marketing.

Premium Services

Education & Strategy

Using emerging markets as a hedge

I spend lots of time and energy pondering ways to hedge the market. Right now my instrument of choice is...

View more education articles »
optionMONSTER stockMONSTER tradeMONSTER