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Options action in the online auction house suggests one investor is not ready to let go of near-term long calls
Related Symbols: EBAY
Shares of online auction house eBay Inc. (NASDAQ: EBAY) have gained 2% so far today, and options action during midday trading suggests at least one investor extended a bullish bet into a later series.
The online retail sector is mixed so far today, but EBAY shares are currently trading up 50 cents, to $25.94. EBAY did not announce any news today that could have catalyzed the pop-up in the stock, and the company has not confirmed an earnings release date. The market, however, expects the report around April 21.
By 12 p.m. EST, the April 30 calls and July 35 calls had crossed the tape nearly 7,500 times each thanks to an investor who likely rolled-out a long position that would have expired next month. It looks like an investor sold to close the April 30 calls for the bid price of five cents per contract and simultaneously bought to open the July 35 calls for 10 cents per contract, paying a net debit of five cents per roll. The nearer-term 30-strike calls are home to current open interest of 8,815 contracts, suggesting investors traded these options to close. On the other hand, current open interest of the July 35 calls is just 161 contracts, suggesting investors opened these option positions.
Bullish investors who rolled these calls could be betting that EBAY shares might experience 40% of upside throughout the later-term and close higher than $35.05 at July options expiration. Or, they are more likely banking on a rally in the options prior to July expiration which could give them the chance to sell the options out at a profit. Implied volatility of the April 30 calls and July 35 calls is roughly 30% compared to a 30-day historical volatility of 28%.
EBAY shares reached a 52-week high of $26 a couple days ago, and have not touched the $30-handle since June 2008. This trend makes it even more interesting that one investor rolled a bullish position expecting the stock to reach new highs between now and July options expiration.
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