Unusual Options Activity: eBay (EBAY)

Online auction site eBay (EBAY) has seen shares move higher over the past year with a number of small dips along the way. One trader sees that trend continuing in the short term.

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  • That’s based on the September 10 $70 calls. Over 5,715 contracts traded compared to an open interest of 122, for a 47-fold rise in volume. The buyer of the calls paid about $0.47 to make the trade.

    With 10 days until expiration, and with shares around $76.50 right at a 52-week high, it’s a coin toss as to whether shares will move in-the-money or not. However, given the company’s long-term uptrend and dominant market position among internet auction sites, a trade here looks worthwhile.

    Action to take: Shares look attractive here overall, given their strong uptrend. Shares also trade at about 19 times forward earnings, a reasonable value in today’s markets, especially with big earnings growth and double-digit revenue growth. Shares even pay a small and growing dividend that’s just under 1 percent right now.

    The September 10 calls are interesting, and could potentially lead to triple-digit gains, but have so little time to play out that they’re truly fighting against the clock. A better trade might be the November $280 calls, last going for about $2.80. They can likely deliver mid-to-high double-digit returns with a better chance of moving in-the-money in the months ahead.

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    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.