Why put sellers find value in Groupon

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Groupon has been weak for a long time, but one investor is finding value in the stock.

optionMONSTER's tracking programs detected the sale of 5,000 April 5.50 puts for $0.33 and the purchase of an equal number of April 5 puts for $0.15. Volume was below open interest at the lower strike, so there are two possible explanations of the trade.

One is that the April 5 puts had been sold at an earlier date, and the short position was rolled up to the April 5.50s. Alternately, both positions may have been initiated, in which case the trade was a put credit spread .

Either way, the investor collected a credit of $0.18 and is looking for the stock to close at or above $5.50 on expiration. (See our Education section for more on market-neutral strategies that make money from the passage of time instead of a directional move.)

GRPN is down 1.46 percent to $5.40 in morning trading and has lost more than two-third of its value in the last year. The daily deals service has repeatedly issued weak results and poor guidance during that time. However, the stock has been holding its ground near $5 since September, which could be leading some traders to believe that it's finding support.

Today's put spread dominates activity in the name, accounting for more than 80 percent of total volume so far today.



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

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


This article appears in: Investing , Options

Referenced Stocks: GRPN

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