Call volume is nearing an annual peak
Options trading is hot on eBay Inc (NASDAQ:EBAY) this afternoon, as the retail stock bounces from yesterday's annual low of $32.10. EBAY shares were last seen up 3.1% at $33.58 on what Trade-Alert is calling "activist chatter," and nearly 103,000 options have changed hands -- more than nine times what's typically seen and volume pacing in the 99th annual percentile.
Most of the action has happened on the call side, with 79,513 contracts on the tape --closing in on the 12-month high of 90,126 EBAY calls traded in a single session, hit back on July 19. The weekly 10/12 33.50-strike call is most active, and all signs suggest new positions are being purchased here, meaning speculators are targeting more upside through this Friday's close, when the series expires.
The October 35 call is also garnering heavy attention, but it looks like traders may be selling to open these options. If this is the case, they are either setting a short-term ceiling for EBAY, or hoping to profit on a post-earnings volatility crush after the retailer reports earnings after the market closes next Tuesday, Oct. 16.
In fact, the stock's 30-day at-the-money (ATM) implied volatility topped out at a 52-week high of 39.2% earlier, while Trade-Alert pegs the ATM term structure for monthly October options at 40.26%. This indicates short-term EBAY options are pricing in extremely elevated volatility expectations at the moment.
What's notable is that the $35 level is currently home to eBay stock's descending 80-day moving average, a trendline that quickly contained a mid-June breakout attempt. And while the equity rallied all the way up to $34.60 earlier, it was swiftly rejected by a trendline connecting lower highs since June. Year-to-date, EBAY is down 10.5%.
