The Retail Stock Poised to Buck Sector Headwinds

Options traders have preferred puts over calls for the online retailer

Aug 29, 2017 at 10:14 AM
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eBay Inc (NASDAQ:EBAY) is having an excellent year, even as many traditional retailers are floundering. The stock has tacked on 17% year-to-date, and is coming off a record high of $37.48 on July 20. Now is an attractive entry point for a bullish play as EBAY bounces from a successful test of its 100-day moving average, which previously contained lows in April and July. Additionally, eBay recently authorized an additional $3 billion in buybacks, which should keep any potential pullbacks in check.

 

170825EBAY

 

Analysts are displaying some skepticism toward the outperformer. Of the 23 brokerages covering EBAY stock, 15 rate it a "hold" or "sell." This means that there is plenty of room for further upgrades down the road for the e-commerce name.

In the options pits, traders have been preferring puts over calls. EBAY's Schaeffer's put/call open interest ratio (SOIR) of 1.93, is at its highest point since October 2016, and ranks in the 95th annual percentile. This indicates that short-term options traders prefer puts over calls by a nearly 2 to 1 ratio.

Meanwhile, options are attractively priced. This is according to Schaeffer's Volatility Index (SVI) of 19%, which ranks higher than just 4% of all other readings from the past year. This implies that EBAY's near-term options are pricing in relatively low volatility expectations.

Lastly, our recommended call has a leverage ratio of 5.7, and will double in value on a 16.6% rise in the underlying equity.

Subscribers to Schaeffer's Weekend Trader Series options recommendation service received this EBAY commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

 

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