(This is an excerpt from an article I originally published on Seeking Alpha on February 13, 2012. Click here to read the entire piece.)
When Facebook filed its IPO papers with the SEC on February 1, the news lit a rocket under almost all things internet. Stocks across the industry got revalued just because Facebook could be worth $75-100B. Even Groupon (GRPN) jumped 5.3% on Feb 1 on its way to a 6-day jump off its $20 IPO price and into its first earnings announcement as a public company. Never mind that Facebook could eventually become a fierce competitor to Groupon.
{snip}
After earnings, I claimed that was the time to buy puts in GRPN: the pre-earnings premium on implied volatility had mostly melted away (see twitter feed). {snip} GRPN has now officially wiped away all the gains it made on Facebook’s coattails. This may be the last time Groupon ever benefits from Facebook.
In the meantime, put options on GRPN have soared. For example, the Feb $22 puts expiring this Friday have roughly doubled from Thurday’s close. While I expect the stock to once again linger around its $20 IPO price for a while, in short order, I also expect the all-time lows of $15 to get tested and eventually broken.
Source: FreeStockCharts.com
Be careful out there!
(This is an excerpt from an article I originally published on Seeking Alpha on February 13, 2012. Click here to read the entire piece.)
Full disclosure: long GRPN puts