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Option volume is accelerated on eBay Inc (NASDAQ:EBAY - 52.78) today, as the online auctioneer prepares to step into the earnings confessional after tomorrow's close. Both calls and puts are trading at more than two times their average intraday volume, but calls have emerged as the crowd favorite. By the numbers, roughly 16,000 calls have crossed the tape, compared to around 13,000 puts.
One of the more notably active strikes is EBAY's February 55 call, which has seen around 2,100 contracts cross. The majority of these have traded at the ask price, and implied volatility was last seen higher, suggesting a portion of today's volume is of the buy-to-open variety. By purchasing these calls to open for a volume-weighted average price (VWAP) of $1.26, traders need EBAY to land north of breakeven at $56.26 (strike plus VWAP) by February expiration, representing upside of about 6.6% to the stock's current price. Delta at this option is currently docked at 36%, implying a 36% chance these bets will finish in the money by the close on Friday, Feb. 15, at which point the options will expire.
Technically, EBAY has been trekking a steady path higher over the past 52 weeks, with the shares gaining around 73% in that time. This upward momentum has been highlighted by the equity's 20-week moving average, which has ferried the stock up the charts since last January. In fact, the equity's most recent bounce off this supportive trendline sent EBAY to an eight-year high of $54.20 on Jan. 8. The security is pulling back from this milestone in today's session, as traders disregard this morning's bullish brokerage note, and, at last check, EBAY has shed 0.7%.
The stock could continue to struggle in the near term. As Schaeffer's contributor Adam Warner noted today, peak call open interest in the front-month series of options currently resides at EBAY's January 2013 55 strike. This area could apply resistance to any potential advance through week's end (when front-month options expire), as the more than 32,200 contracts that rest here begin to unwind.