Further downside in store for eBay (NASDAQ: EBAY)?

By
A A A

eBay Inc. (NASDAQ: EBAY ) has not announced any news since its better-than-expected earnings report on Jan. 20 (the company beat earnings-per-share estimates by four cents), but at least one option investor is calling for a significant slide in the stock and boosted put volume in the Internet auction house.

More than 22,500 March 19 puts have changed hands in EBAY so far on the day versus current open interest of just 195 contracts. These puts have gained two cents on the day and have an 8-delta. This means the puts should be relatively unchanged on the day, but buying action has pushed the prices of these puts higher than their delta suggests. Additionally, the implied volatility of these options is 41, compared to a 30-day historical volatility of 37%.

Out of the gate, we saw several large blocks trade around an ask price of 15 cents. The breakeven on this trade is $18.85, meaning investors who bought these puts will turn profits on this purchase if EBAY shares close lower than that level at March options expiration in 53 days. The put buyers we saw today are expecting the stock to drop at least 18% throughout the next couple months. If the stock drops significantly prior to the options' expiration, investors could choose to sell back the puts and book profits instead of holding on to them.

EBAY shares are currently trading down 18 cents to $23.40 on the day, and the stock has maintained a range between $22 and $24 throughout the last few months. EBAY shares are currently trading roughly 6% off their 52-week high of $25, and at least one investor expects further downside in the near-term.

Normal daily options volume in EBAY is roughly 22,000 contracts. Today's option volume in EBAY has far-surpassed that level, and the bulk of the action continues to accumulate in the March 19-strike puts.

For more on EBAY:

Winning option strategies on eBay ( EBAY )

MidnightTrader's after-hours watch list scorecard: STX, SBUX, EBAY, SWKS



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Options

Referenced Stocks: EBAY

Karla Yeh

Karla Yeh

More from Karla Yeh:

Related Videos

Budgeting for Baby
Budgeting for Baby                  
A Home to Retire In
A Home to Retire In                 

Stocks

Referenced

Most Active by Volume

86,692,048
  • $16.82 ▼ 1.35%
66,073,054
  • $13.30 ▼ 6.27%
54,801,491
  • $14.59 ▼ 1.35%
54,305,010
  • $76.55 ▼ 3.15%
53,982,567
  • $3.42 ▼ 2.01%
53,146,472
  • $97.21 ▼ 1.60%
50,334,521
  • $99.18 ▼ 1.56%
44,049,276
  • $25.03 ▼ 0.56%
As of 10/1/2014, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com