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Free Profits on Groupon Inc (GRPN) Stock After Q4 Earnings

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Jim Cramer said Groupon Inc (NASDAQ: GRPN ) "is a beast" today on CNBC. All I know is that if I can find it on Groupon, that's where I'm buying it. The company isn't going anywhere, and that's enough for me to trade GRPN stock virtually worry-free.

Earnings to Watch: Groupon (GRPN)

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I could spend an hour dissecting the technical aspect of Groupon's price charts and poring over its fundamentals, but I won't. Why not? Because GRPN options give the flexibility to create income based on the aforementioned logic without even spending a penny out of pocket.

I want to sell downside risk against levels I deem safe. This is, as I like to say, the equivalent of me selling someone else a losing lottery ticket. I'll collect the premium today, but it won't be mine to use until the contracts expire or I close the trade. If the price of GRPN stock stays above my level, I win the bet - and whoever bought the lottery ticket loses their price premium to me.

How to Trade GRPN Stock Here

The bet: Sell a GRPN Jan 2018 $3 put for 40 cents to open. By selling naked puts, I commit to buying the stock at that price if it falls below it. So my breakeven price is $2.60 per share. I feel comfortable owning Groupon stock at $2.6 should the worst-case scenario happen. This would be close to the all-time low in the stock.

A really bullish trader could spend the premium on buying calls to further make their position in GRPN stock even more bullish. That's not for me. I have more faith that buyers will step in to support the stock on dips than I am of chasing the rallies.

Usually I like to balance my trades by selling opposing bearish risk, but in this case, I feel like I would be opening myself to undue risk. So I will leave this trade one-sided as written.

I am not required to hold my trade through its expiration. I can close it at any time for partial gains or losses. Also, I could buy sacrifice May puts for 3 cents if I so feel too worried about a complete collapse.

Nicolas Chahine is the managing director of SellSpreads.com . As of this writing, he did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @racernic and stocktwits at @racernic .

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The post Free Profits on Groupon Inc (GRPN) Stock After Q4 Earnings appeared first on InvestorPlace .

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


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

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