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Why trader is selling calls in Groupon

Chris McKhann (chris.mckhann@optionmonster.com)

A large trade sees limited upside in Groupon even as the stock climbs off all-time lows.

optionMONSTER's tracking systems detected the sale of 10,000 July 4 calls in a single print for the bid price of $0.70. Open interest in the strike was just 4 contracts at the beginning of the day, so this is clearly a new position.  

The call selling is a bet that GRPN will be below $4 at expiration in mid-July 2013. The options were very likely sold against long shares in a covered call position, which would be bullish up to the strike price but forgoes any gains beyond that level. (See our Education section)

GRPN gained more than 15 percent on Wednesday, closing at $3.88. Shares of the daily-discount service have plummeted since trading above $25 in early February and hit a lifetime low of $2.60 last week, but the stock has been rising since then.

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