eBay Inc (EBAY): 2 Ways to Play Puts Ahead of Earnings

eBay Inc puts are being bought and sold to open ahead of tonight's quarterly report

Oct 15, 2014 at 1:47 PM
facebook X logo linkedin

eBay Inc (NASDAQ:EBAY) option traders are loading up on puts ahead of the company's quarterly earnings report, due out after tonight's close. Puts are trading at four times the average intraday rate, and are outpacing calls by a more than 2-to-1 margin. Amid this accelerated activity, the equity's 30-day at-the-money implied volatility (IV) has shot 9.8% higher to 34% -- just 3 percentage points from a 52-week peak.

Drilling down, pre-earnings speculators are targeting the equity's October 48 put, but not all of the activity is of the traditional bearish variety. Of the 25,824 contracts traded here, it's been a pretty even split on both the bid and the ask sides, signaling a mix of seller- and buyer-driven activity -- a theory echoed by data from the International Securities Exchange (ISE). Meanwhile, IV is up 6.3 percentage points, and volume outstrips open interest, making it safe to assume new positions are being initiated.

By writing the puts, traders expect EBAY to remain north of $48 through this Friday's close, when front-month options expire. By purchasing the puts to open, speculators are betting on the stock to breach this level by week's end. Amid today's 2.7% decline which has EBAY lingering near $49.22, delta on the put has moved to negative 0.31 from negative 0.15 at last night's close, suggesting an increased probability the option will be in the money at expiration.

Historically speaking, EBAY's post-earnings price action tends to favor bears. Over the past eight quarters, specifically, the stock has averaged a loss of 1.5% in the session subsequent to reporting, which widens to 2.4% when going out one week. The options market, meanwhile, is expecting a roughly 4% post-earnings move, based on pricing structure of the near-the-money October 49.50 straddle.

Elsewhere on the fundamental front, Piper Jaffray continues to wax pessimistic on EBAY ahead of Apple Inc.'s (NASDAQ:AAPL) upcoming rollout of its Apple Pay feature. Earlier, an analyst at the brokerage firm said that with estimates of 30 million iPhone 6 and 6 Plus users, "investors' concern around PayPal will be a headwind to shares" of eBay Inc (NASDAQ:EBAY).


Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls



Rainmaker Ads CGI