Option volume surged in eBay yesterday as an investor crafted a
complex bullish strategy in the online auction giant.
Almost 50,000 contracts changed hands in the session, compared with
12,400 on a typical day. The largest trade involved the November
57.50 calls and the November 50 puts. Some 12,000 of the calls were
purchased for $1.10 and roughly 4,100 of the puts were sold for
$0.81. Volume was more than 4 times the previous open interest at
each strike, indicating that new positions were initiated.
lock it the price where shares can be purchased, while
generates income and creates an obligation to get long at lower
prices. Combining the two trades creates a position that's similar
to owning stock, profiting to the upside and losing money to the
The unusual aspect of yesterday's transaction is that more calls
were bought than puts sold. It cost about $1 million to open the
trade but controls the equivalent of more than $24 million in stock
based on the
of the contracts. (See our
EBAY rose 1.83 percent to $54.63 yesterday and has spent all year
churning near its previous high from 2004. The shares gapped lower
after the last two earnings reports, but both times buyers stepped
in to defend the $50 level. That could make investors comfortable
writing puts at that strike.
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