With the swings in volatility this year, I never thought a 1.15 move would count as exciting. But moving from 13.75 up 1.15 counts as excitement on a day, when the SPX was down .15. Yes .15! I think there is some interesting VIX future action going on (premiums are pretty fat), but the lower VIX gets folks a bit scared. VIX got within .09 of the year lows going into the Italian Bond auction this week. That is pretty impressive for how much the mood has swung. I think there is some anticipation coming into the Italian debt offering later this week and will cover a trade for that tomorrow, since we have a day, at least, to go. FB gets the nod today.
Many of my option mentoring students were wondering about the move priced into GRPN options today. The stock 7.5 dollar stock, into its earnings had an incredibly high volatility, almost all of it priced into August options that expire tomorrow. We can clearly see the vol pump in GRPN Aug in this cut out fromOption Vision (a new analytic tool we will be using here at Option Pit with some regularity).
Europe is putting big pressure on the US equity market. In fact, the close to close activity looks much more benign, I think, than the intraday selling. After watching the most overvalued security in the world, the TLT, trade to a new high for the year (and it could go higher as the Greek electorate figures out what happens after they get to replace their shiny Euros with TP), I looked at revisiting GRPN just post-earnings. A few things were bothersome about the activity today.
First the stock opened strong on better than expected earnings (more revenue and smaller losses), close to $14.97 and then proceeds to sell off with hasty abandon after the shorts covered. That is not a good sign for a stock.
Not exactly the best day for Groupon. On Friday, they announced that they were going to have to restate revenues, again. Needless to say, the stock got crushed, and with the added uncertainty, option implied volatilities went up. But does that mean it is too late to take action on this name? Is it too late to buy premium in hopes the stock drops? My initial thoughts are no. Take a look at the speed at which Groupon's stock can take a dive: