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Put Volume Pops as eBay Inc (EBAY) Retreats

eBay Inc put volume is running at 10 times the intraday average this morning

by 8/28/2014 10:38 AM
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Put buyers have been targeting eBay Inc (NASDAQ:EBAY) in recent weeks, per the stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.44, which ranks in the 61st annual percentile. Simply stated, puts have been bought to open relative to calls at a slightly faster-than-usual clip of late.

This trend has picked up the pace in today's session, with puts trading at 10 times what's typically seen at this point in the day, and outpacing calls by a roughly 13-to-1 margin. A healthy portion of the day's early action has centered on EBAY's weekly 9/12 54-strike put, where 14,378 contracts are on the tape -- mostly at the ask price, pointing to buyer-driven activity. Implied volatility is on the rise, and only 1,092 contracts currently make up open interest here, making it safe to assume a fresh batch of bullish bets is being initiated.

The volume-weighted average price (VWAP) for the out-of-the-money puts is $0.39, making breakeven at the close on Friday, Sept. 12 -- when the weekly series expires -- $53.61 (strike less VWAP). Profit will accumulate on a move down to zero, while losses are capped at the initial premium paid, should EBAY settle north of the strike at expiration.

On the charts, EBAY has been digging itself out of a hole since hitting a year-to-date low of $48.14 in mid-June, with the shares up about 15%. In today's session, though, the shares are following the broader equities markets lower -- down 1.2% at last check to trade at $55.24 -- and could find themselves testing support at their year-to-date breakeven mark of $54.87. Off the charts, rumors are swirling that London-based online fashion firm ASOS plc could be a potential takeover target for eBay Inc (NASDAQ:EBAY).


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