Did eBay Inc. (EBAY) Option Bears Make Bad Bets?

eBay Inc (EBAY) saw increased put activity ahead of earnings

Digital Content Group
Jan 22, 2015 at 9:07 AM
facebook twitter linkedin

Last night, eBay Inc (NASDAQ:EBAY) released its fourth-quarter numbers, and unveiled plans to spin off its PayPal division and either sell or split from its Enterprise unit. The company also announced plans to cut 2,400 jobs. In response, the security is up 3% in electronic trading, after closing yesterday at $53.38.

EBAY's pre-market move is likely to the dismay of recent options speculators, as puts traded at 10 times their normal daily pace yesterday. Digging deeper, the weekly 1/30 52-strike put was most popular by far, with nearly 23,000 contracts changing hands. It appears most activity was of the buy-to-open variety, a theory confirmed by data from the International Securities Exchange (ISE).

These bearish traders are hoping for EBAY to move south of breakeven at $51.15 (strike less the volume-weighted average price of $0.85) by next Friday's close, when the weekly series expires. Gains will accumulate below here, while losses are limited to the initial premium paid, should EBAY settle north of the strike at expiration.

From a broader perspective, eBay Inc (NASDAQ:EBAY) has been a technical laggard, dropping nearly 2% year-over-year. With today's anticipated pop, though, the equity could take out both its 10-day and 20-day moving averages for just the second time in 2015.

Daily Chart of EBAY Since December 2014

If you are not making money with options, you aren’t buying options like this…

There is no options strategy that more perfectly approaches trading the fastest moving and most volatile stocks available in the marketplace than this one. In fact, there is no strategy that better utilizes put options for optimal returns and a real trading edge over other traders in the exact same market. New options traders fail out at an incredible rate without proper trade research, execution timing, and option picking. Capitalize on Schaeffer’s 100+ years of options trading excellence with the most coveted product launch in company history. Don't waste another second... join us right now before the next round of trades are released!



Special Offers from Schaeffer's Trading Partners