Play the Groupon Earnings with Covered Calls
Shares are currently trading at $23.61 a share, and Call options that are expiring next Friday, February 17th are trading at a premium right now.
A good trade right now if you think GRPN shares are going to trade sideways or slightly up is to sell covered calls for the February 17th strike.
The $24 strike is trading at $1.30 right now and the $25 is trading at $.95.
Now, here are the risks: you'll be limiting your upside potential if Groupon has a great earnings call, (which we don't think is that likely at this point, so close to IPO). It's all about guidance at this point - if they guide way up, shares could take off. If they guide down shares could take a big hit. You also don't have that much downside protection if the floor falls out from under GRPN, although you should be able to set up a stop limit order.
I personally bought 500 shares and sold 5 of the $24 strikes at $1.30 for an "instant" profit of $650. That's a gain of 5% on selling call options that are going to expire a week out! So my downside break-even point is $22.31 and upside potential is $24 plus the Option Premium of $1.30, totalling $25.30.
If GRPN shares don't close above $24 by the time the options expire next Friday, I will probably just sell 5 more covered calls. It's a great way to generate income in your portfolio.
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