Put Buyers Lining Up As eBay Earnings Loom

EBAY options traders seem to be favoring puts lately

Managing Editor
Jul 19, 2017 at 1:06 PM
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Auction site eBay Inc (NASDAQ:EBAY) is set to report its second-quarter earnings tomorrow, and investors are keeping their eye trained on the e-commerce name, which has a choppy history in the earnings spotlight. Below, we will take a look at eBay stock's performance on the charts, and how EBAY options traders are speculating ahead of tomorrow's earnings release. 

EBAY stock is up 0.8% to trade at $37.08, a chip-shot away from its record high of $37.20, which it reached last Friday. The stock is likely enjoying some broader tech tailwinds, and received a price-target boost to $40 from $39 at Benchmark today -- in uncharted territory. EBAY shares have had a solid year, tacking on 25% year-to-date, led higher by their 80-day moving average. Furthermore, the shares recently broke north of the $35-$36 neighborhood following the company's Shopify news.


ebay june 19

eBay shares have a rocky history post-earnings, though. While EBAY stock dropped 3.9% the day after its last earnings release in April, and fell 10.8% in the session after earnings in October, the shares have made a one-day post-earnings move higher in five of the last eight quarters. eBay stock has averaged a one-day move of 7.9% in either direction following the last eight earnings releases, yet near-term options traders are betting on an even bigger swing of 9.8% this time around, based on at-the-money implied volatility data.

Looking into the options pits, traders have been picking up bearish bets over bullish at an accelerated clip. EBAY stock has racked up a 10-day put/call volume ratio of 1.26 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks in the 90th percentile of its annual range.

In the front-month series, the July 35 put is home to peak open interest, with nearly 11,000 contracts outstanding. Digging into the soon-to-be front-month August series, the August 36 put has attracted notable interest lately as well, with nearly 2,000 contracts added just yesterday. Over the past 10 days, though, the out-of-the-money weekly 7/28 33-strike put has seen the biggest open interest increase, with more than 6,100 contracts added.

Considering EBAY stock's recent quest for new highs, it's possible that some of the recent put buyers -- particularly at out-of-the-money strikes -- may have purchased the options as shareholder insurance. In other words, EBAY shareholders could be buying protective puts in the event of a near-term downturn.

 

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