Options Brief: EBAY

EBAY – eBay, Inc. – A short strangle implemented on online marketplace operator, eBay, Inc., this morning suggests one options player expects the price of the underlying stock to trade within a specified range through January 2011 expiration day. EBAY’s shares earlier gained as much as 1.535% to touch an intraday high of $24.47, but are currently up 0.45% to stand at $24.21 as of 12:10 pm ET. The strangle strategists sold 6,000 puts at the January 2011 $24 strike for premium of $1.83 apiece, and shed 6,000 calls at the January 2011 $26 strike to take in premium of $0.19 each. Gross premium pocketed on the transaction amounts to $3.02 per contract. The investor keeps the full premium received as long as eBay’s shares trade above $24.00 and below $26.00 through expiration. Short stances assumed in both call and put options expose the strangle player to losses in the event that EBAY’s shares rally above the upper breakeven price of $29.02, or should shares slip beneath the lower breakeven point at $20.98, ahead of January 2011 expiration.

About Andrew Wilkinson 1023 Articles

Affiliation: Interactive Brokers

Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.

Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.

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