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eBay Inc (NASDAQ:EBAY) made headlines yesterday with a new "click-and-collect" partnership with U.K. retail chain Argos, while the online merchant's subsidiary, PayPal, began offering small bank loans to businesses. Both of these developments come just two weeks after the company acquired predictive-analytics startup Decide.com. Suffice it to say, EBAY's been busy.
In spite of that news, EBAY's options pits were relatively slow, as total volume finished at 89% of its typical daily total. The session's single biggest trade focused on the November 55 call, and involved a block of 2,946 contracts, which changed hands at an ask price of $2.44 each. Open interest increased overnight, as well, suggesting the calls were purchased to open -- a theory confirmed by data from the International Securities Exchange (ISE).
In order for the block trader to profit, he needs eBay to muscle 5.3% north to breakeven at $57.44 (strike price plus premium paid) from its current post at $54.58, before the back-month options expire. The stock last explored that territory on July 17, before a poorly received second-quarter earnings report dropped EBAY by over 9% in the ensuing week.
Speaking of earnings, eBay Inc (NASDAQ:EBAY) is scheduled to enter the earnings confessional once again on Oct. 16, after the close. While the equity's previous turn disappointed shareholders -- even though its per-share earnings were in line with estimates -- EBAY has a solid overall track record. Specifically, the e-commerce colossus has topped the bottom-line outlook in six of the past eight quarters, and met projections in the other two. The result is an average one-day, post-earnings gain of 2.2%.
Delta on the aforementioned, near-the-money call currently rests at 0.50, or 50%, so the option has a 1-in-2 chance of finishing in the money. However, yesterday's big trader can rest assured knowing that, even if the underlying stays below the 55 strike, the most he can lose is the initial premium paid.
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