eBay Option Sellers Target Hefty Premiums Ahead of Earnings 

Traders may also be buying calls in the weekly 10/12 series

by Karee Venema

Published on Oct 9, 2018 at 2:14 PM

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%.

ebay stock daily price chart oct 9

Stocks to Buy Before a Fed Rate Hike
The central bank is widely expected to hike interest rates on Wednesday
Breaking Down the Quick & Dirty S&P Drop
The SPX fell more than 10% in 50 sessions
Bet on This Medical Device Stock to Break Out
The shares could be poised to break out of recent congestion below $245
From Schaeffer's Pro Traders
Weekly Options Secrets Revealed

Direct from our Schaeffer's traders, your FREE guide to winning with weekly options!


Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories


Former Hedge-Fund Manager Reveals Stunning Research
This stunning research revealed by the former hedge-fund who predicted the last NASDAQ crash could have some Americans thinking twice before hoarding cash.
Inside the Big Moves from Navistar and Rent-A-Center Stocks
Two of today's biggest stock moves are coming from NAV and RCII
Take-Two Levels Up On Analyst Coverage
Shares of TTWO are up after Buckingham Research weighed in
Former Hedge-Fund Manager Reveals Stunning Research
This stunning research revealed by the former hedge-fund who predicted the last NASDAQ crash could have some Americans thinking twice before hoarding cash.