May. 21 at 1:57 PM
$GRPN - This is not investment advice or a recommendation to buy or sell any security. It is simply my own view of how the setup looks today and how I am thinking about expressing it with options.
Over the last few quarters, Groupon has quietly developed one of the more extreme structural setups in the market. As of the most recent short interest report, roughly 13.7 million shares are sold short, which is about 57% of the public float, and it would take close to five full days of average trading volume for shorts to fully cover. That level of crowding in the short book, against a relatively tight float, is unusual and creates a mechanical vulnerability: if the stock starts to move higher and liquidity is not there, a good portion of the demand from shorts will be forced rather than voluntary.
At the same time, the company itself is aggressively shrinking the denominator. In the first quarter of 2026 Groupon repurchased approximately 1.94 million shares for 21.3 million dollars, and then bought another roughly 860 thousand shares in April for 10.1 million dollars. Across Q1 plus April, that is about 2.8 million shares retired for just over 31 million dollars, all against a broader authorization in the neighborhood of the mid‑200 million range. Management has guided to 2026 revenue of 513–523 million dollars, adjusted EBITDA of 70–75 million dollars and at least 60 million dollars of free cash flow, and is choosing to direct a significant portion of that capacity into buybacks. That combination of high short interest and an actively shrinking float is, in my view, the core of the thesis.
Layered on top of that is the options market. Open interest in GRPN options is meaningful and, more importantly, call-heavy around certain strikes and expirations. In simple terms, when there is concentrated call open interest near and slightly above the current share price, the market makers who are short those calls end up short delta. As the stock trades up toward those strikes, they need to buy stock to stay hedged. That is the gamma effect. In a name where more than half the float is shorted and the company is in the market repurchasing shares, each incremental share that dealers or shorts need to buy is competing for a smaller and smaller pool of available stock.
The net effect is that three different types of buyers can all be active at once: the corporate bid from the buyback, the forced bid from shorts covering, and the hedging bid from options dealers when calls are being bought and delta is rising. None of this guarantees a move, but it changes the probability distribution. Modest positive news or even just continued technical strength can push the stock into regions where liquidity is thin and every marginal buyer has outsized price impact. In that environment, the path of least resistance can be sharply higher, even if fundamentals are only gradually improving.
In terms of structuring exposure around this, the way I am thinking about it is through a split options time frame. On one side, I like having calls that expire around July 2026. Those contracts give me more sensitivity to the nearer‑term squeeze dynamics: the days and weeks when short interest is still elevated, the buyback is active, and call flows cluster around nearer‑dated strikes. July options carry more gamma, which means they respond more to fast moves, and they are the instrument that best expresses the idea that the next significant leg could come sooner than the market expects if momentum and positioning align.
On the other side, I also want to have some exposure that extends out to October 2026. That second time frame is meant to capture the slower-burning parts of the story: additional quarters of buybacks, the compounding effect of a reduced share count on per‑share metrics, and at least one more earnings and guidance cycle where the company can either reinforce or improve its narrative. October calls have more time value and lower daily decay, which gives the thesis room to be early without being outright wrong, and they provide a way to stay involved if the biggest squeeze leg happens later in the year rather than in the immediate term.
Between those two maturities, the idea is not that I know exactly when the move will happen, but that I want to be exposed to both the tactical and the structural sides of the trade. July is there to participate if the combination of short interest, options positioning and buyback produces a more violent move in the near term. October is there to benefit if the stock rerates over several months as the share count comes down and cash flow and EBITDA targets are hit or exceeded. I view this as a way to let the mechanics of the trade work over time rather than trying to pinpoint a single perfect date. It is simply how I am framing the risk and reward for myself, not a recommendation for anyone else.
