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Most Active Options Update: eBay Inc (EBAY)

eBay Inc option traders forecast another record high by week's end

by 3/6/2014 3:13 PM
Stocks quoted in this article:

The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One name of notable interest this afternoon is eBay Inc (NASDAQ:EBAY).

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Amid eBay Inc's recent rally to record heights, option traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have been upping the bullish ante. During the past 10 sessions, specifically, speculators on these exchanges have bought to open nearly five calls for each put. What's more, the resultant call/put volume ratio of 4.99 ranks in the 87th percentile of its annual range, indicating a healthier-than-usual bias toward long calls over puts.

This call-skewed trend is evident in today's session, where roughly 2.8 calls have changed hands for each put. One of the most sought-after positions is EBAY's weekly 3/7 60-strike call, where more than 2,500 contracts are on the tape. The majority of these contracts have gone off at the ask price, implied volatility has ticked higher, and volume has the edge over open interest, collectively inferring the initiation of new bullish positions.

By purchasing these calls to open, speculators expect EBAY -- currently perched at $59.56 -- to topple the $60 mark by this Friday's close. Although EBAY is sitting just a stone's throw away from the strike price, this level represents record-high territory for the security. As such, delta for the call is docked at 0.33, or 33%, suggesting a 1-in-3 chance of an in-the-money finish at week's end.

On the fundamental front, the push-and-pull between eBay Inc (NASDAQ:EBAY) CEO John Donahoe and activist investor Carl Icahn is heating up ahead of the company's mid-April annual shareholders meeting. Most recently, Donahoe said yesterday that he has heard from a number of stockholders that do not support a PayPal spin-off. Icahn responded in an open letter, saying he is "naturally skeptical of recent articles reporting eBay CEO John Donahoe's claims of widespread stockholder support for keeping the companies together."


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