Groupon Sold Off Another 15%; Put Options, Implied Volatility Spike As GRPN Trades Below IPO Price

GRPN from IPO (FreeStockCharts.com)
Groupon is now trading below its $20 IPO price after closing at $16.88 yesterday (11/23), down 15.50% . On 11/22 it closed at 20.07, down 14.75% (previous post: Groupon Lost 14.8% Yesterday, Social Media Stocks Destroyed In November). I think GRPN's options put a spell on the stock when they arrived at the CBOE on 11/14/2011. The December GRPN 22-25 puts sold off initially when GRPN traded between 23-26.9, but then rose 102%-191% when GRPN broke down and hit a low of $16.71 yesterday (chart of Dec 23 put below). GRPN's implied volatility spiked to 123% from 80% initially (ivolatility chart below).

Groupon only offered 5.5% (35 million) of its total outstanding shares, so there is a tight float. A week before the options started trading, all of the "available" shares were used to short the stock (borrow-and-sell). I also read that due to the tiny float, brokers initially charged "an annual rate of 90 percent to 100 percent last week to borrow Groupon's stock." Then, according to Crain's Chicago Business, "the premium to borrow such shares fell from more than 90% to about 30% early this week, opening the door for short sales." It was interesting to see how it all panned out, especially after reading multiple blog posts recently on the best ways to own or short the stock. You can see that $23-$23.30 was the line in the sand and then the IPO price. Watch that steep descending channel (downtrend) and overhead resistance level (looks like $18) to see when the trend changes. By the way, Morningstar analyst Rick Summer believes Groupon is worth $8 per share. He was featured on Fox Business on 11/6, watch the video below.


GRPN Implied Volatility Index Mean (ivolatility.com)

GRPN December 23 Put (via optionsxpress)


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