I Would Not Buy GRPN with a Groupon Coupon
I Would Not Buy GRPN with a Groupon Coupon
Europe is putting big pressure on the US equity market. In fact the close to close activity looks much more benign I think than the intraday selling. After watching the most overvalued security in the world, the TLT, trade to a new high for the year (and it could go higher as the Greek electorate figures out what happens after they get to replace their shiny Euros with TP) I looked at revisiting GRPN just post-earnings. A few things were bothersome about the activity today.
First the stock opened strong on better than expected earnings (more revenue and smaller losses) close to $14.97 and then proceeds to sell off with hasty abandon after the shorts covered. That is not a good sign for a stock.
Charts by TOS (www.thinkorswim.com)
Second the volatility came in pretty good as one would expect post-expiration but the borrow remained very strong in the stock at about a .70 credit on the close. With the 30 day Volatility still well in the 100% range the short interest in here is still pretty thick. GRPN retraced almost all of its gains from the morning to close $12.17.
charts by livevol (c) www.livevolpro.com
Third is that the lockup is coming off in Jun. Having more shares in the market should help the float and make it easier to short but it also gives natural sellers a chance to hit the bid. It just wonít be the shorts covering positions anymore. Longs get to cash out and buy to flats in Chicago. I wonder what they will get for the shares by then. To quote my compadre Mark Sebastian, I would not buy GRPN with a Groupon Coupon.
The Trade
Keep long put time spreads on in GRPN out of the money at least 10%. Use the lower IV in Jul to pick some up and sell front month against them.
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Mark Sebastian is the Director of Eduction for Option Pit, and a former market maker on both the Chicago Board Options Exchange and the American Stock Exchange. He is co-host of "Option Block," the wildly popular show on The Options Insider Radio Network.
He has been published in nationally on Yahoo Finance, quoted in the Wall Street Journal is a featured contributor for TheStreet.com. He also writes regularly for SFO, and OptionsZone, and is the managing editor for Expiring Monthly: The Option Traders Journal.
To learn more about Option Pit and its mentoring services, please visit OptionPit.com
Mark Sebastian is the Director of Eduction for Option Pit, and a former market maker on both the Chicago Board Options Exchange and the American Stock Exchange. He is co-host of "Option Block," the wildly popular show on The Options Insider Radio Network.
He has been published in nationally on Yahoo Finance, quoted in the Wall Street Journal is a featured contributor for TheStreet.com. He also writes regularly for SFO, and OptionsZone, and is the managing editor for Expiring Monthly: The Option Traders Journal.
To learn more about Option Pit and its mentoring services, please visit OptionPit.com
About Mark Sebastian
Mark Sebastian is a former market maker on both the Chicago Board Options Exchange and the American Stock Exchange. Along with his role directing the path of education for Option Pit, Mark is currently the director of risk for a private hedge fund. He writes a daily blog, the Option Pit blog, formerly Option911. Sebastian has been published nationally on Yahoo Finance, Google finance, Financial Times Alphaville and is a featured contributor for TheStreet.com. He is also published regularly at SFO, the Options Insider, and is one of the Co-Hosts of The Option Block Podcast, a featured Podcast from Options Insider Radio. Mark is the managing editor for Expiring Monthly: The Option Traders Journal. Sebastian has a Bachelor's in Science from Villanova University.
To learn more about Option Pit and their mentoring services, please visit: http://www.optionpit.com
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