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Near-Term Traders Remain Planted in eBay Inc's (EBAY) Bullish Camp

EBAY's weekly calls take center stage

by 3/25/2013 1:41 PM
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eBay Inc (NASDAQ:EBAY - 51.35) is following the broader market lower today, but that hasn't kept bullish traders at bay. Approximately 26,000 calls have changed hands so far, which is double the equity's anticipated intraday call volume. On the other side of the trading aisle, 19,000 puts have crossed the tape. It looks as though a number of today's speculators are hoping EBAY will trek higher over the course of the next few days.

The two most popular calls have been the weekly 3/28 52.50 and 55 strikes, which have seen 4,726 and 4,498 contracts traded, respectively. A large portion of them were exchanged at the ask price, implying they were purchased. Meanwhile, today's volume exceeds current open interest levels at both strikes, and implied volatility has surged during the course of the session -- underscoring our theory of new bullish bets.

The 52.50 calls traded at a volume-weighted average price (VWAP) of $0.53, while the 55 calls crossed at a VWAP of $0.23. In the case of the former, traders are hoping EBAY will muscle north of $53.03 (strike price plus the VWAP) by this Thursday's close, which is when these weekly options expire. In terms of the latter, the shares must ascend the $55.23 level within the same timeframe in order for speculators to secure a profit.

eBay Inc is certainly no stranger to bullish attention in the options pits, though. The equity's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio sits at 2.51, indicating calls bought to open have more than doubled puts during the past two weeks. This ratio ranks above 73% of other such annual readings, meaning traders have been picking up calls over puts at a faster-than-usual pace.

As a result, Schaeffer's put/call open interest ratio (SOIR) for the online auctioneer rests at 0.74, with calls outnumbering puts among options due to expire within the next three months. This ratio registers in the 21st percentile of its annual range, conveying near-term traders are more optimistically aligned toward the security than usual.

Although the stock sports a 52-week gain of more than 38%, EBAY's had a lackluster start to the year, gaining less than 1% in 2013. Furthermore, the shares are currently trading below their 20-week moving average, a trendline that has been breached just once on a weekly closing basis since January 2012.


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