Put seller bets eBay price will hold

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eBay has been fighting its way higher amid an improving financial backdrop, and one investor seems confident that it will hold its ground.

EBAY optionMONSTER's tracking systems detected the sale of more than 7,000 January 28 puts for $0.73 against open interest of 5,234 contracts. The trade accounted for about half the options volume in the online auction stock so far today.

EBAY fell 0.30 percent to $30.22 afternoon trading but is up 29 percent in the last three months. Some gains occurred on Oct. 21 after the company reported better-than-expected earnings and issued bullish guidance.

Most of the strength came from its PayPal payment service, though there was also evidence that its online marketplaces are gaining traction. The news followed weak reports in July and April. The company also recently priced its first bond sale to exploit the low interest rates.

That was positive enough to make the shares gap higher. Today's option trader is looking for that gap to provide support into the New Year. The investor would then keep the $0.73 earned as long as EBAY stays above $28.

If it falls below that level, the trader will have to buy the stock for $28. Investors often write puts on stocks they like as a way to earn income and are willing to own on a pullback. (See our Education section)

(Chart courtesy of tradeMONSTER)



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.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: EBAY

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