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Option Brief: Bearish options activity surged on eBay Inc (NASDAQ:EBAY) yesterday, as traders faded the stock's Cyber Monday gains. Roughly 44,000 puts changed hands during the course of the session, which was more than double the equity's average single-session volume.
Digging deeper into the data, it appears that matching blocks of 1,500 puts were exchanged simultaneously at the weekly 12/6 50 and 51.50 strikes. The former traded at the bid price of $0.17 each -- suggesting they were sold -- while the latter crossed near the ask price at $0.65 apiece, implying they were bought. Open interest increased at both strikes overnight, pointing to new positions. In other words, it looks as though one trader constructed a bear put spread on EBAY for $0.48 per pair of contracts.
In other words, the strategist is counting on the shares to finish at or below $50 by this Friday's close, when these weekly options expire. Breakeven in this scenario is $51.02, or the purchased strike less the net debit. His maximum profit, meanwhile, is limited to $1.02, or the difference between the strike prices, minus the net debit. Conversely, his potential losses are capped at the net debit paid. At last check, eBay Inc (NASDAQ:EBAY) was lingering near $51.91.