Groupon’s stock has run from the 2013 low at $4 to highs above $12 before this recent downturn. The midpoint support of the move sits at $8 which has held strong on a weekly over the last month of trading.
Cheap on any stock is relative, with the downside risk to zero less than the unlimited upside potential. Risk to reward against the $8 level on a monthly basis favors the bulls at this time. The downslide accelerated in 2012 when GRPN failed at the $8 level. That became a technical pivot in 2013 with a breakout that has never looked back. Lean on the $8 level as key weekly support.
The high implied volatility makes option selling strategies attractive as probability trades. Option tactics can be employed to make money in Up, Down and Sideways action to take advantage of other variables or time and volatility. The fear and uncertainty can be used to get in another 8% lower for those who are at worst are comfortable holding on to an inexpensive stock to wait for a potential recovery.
TRADE SETUP
Sell the GRPN April $8 Puts to open at $ 0.35 or better. The cash secured Put sale would assign long shares at $7.65 if it is put to you costing $765 per option sold. If assigned shares, a May Covered Call can be sold against the stock to lower cost basis again if you own it. The potential return on risk is 4.5% with a month until expiration. If the stock continues down you can buy the shares for 8% cheaper than the current share price. Otherwise, you get paid not to.
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