Complex strategy is bullish for Groupon

By David Russell,

Shutterstock photo

Morgan Stanley likes Groupon, and one big investor is seconding that motion.

optionMONSTER's Heat Seeker monitoring system detected the purchase of about 7,300 November 12 calls for $0.95. Equal numbers of contracts were sold in the November 9 puts for $0.50 and the November 16 calls for $0.20. Volume was well above open interest at all three strikes, indicating that new positions were initiated.

The trade is a bullish three-way combination. It cost $0.25 and will inflate to $4 if the e-commerce stock closes at or above $16 on expiration--a potential profit of 1,500 percent. The investor is also on the hook to buy shares for $9 if they drop below that level, so he or she could lose plenty of money in the event of a sharp selloff. (See our Education section for more on the perils and benefits of selling puts .)

GRPN is up 5.59 percent to $10.87 in early afternoon trading after Morgan Stanley boosted its rating to "overweight," predicting an improvement in the company's business. The shares had consolidating and bounced around $9 before that recommendation.

Total option volume is quadruple the daily average so far in the session, according to the Heat Seeker.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing Options
Referenced Stocks: GRPN

More from optionMONSTER




Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by