eBay Earnings Trade Ideas

• Posted by Greg Harmon
• on October 17th, 2012

eBay, $EBAY, pulled back over the last month, just as it did for the month prior to its last earnings report. As it heads into the report tonight it has a Relative Strength Index (RSI) that has held in bullish territory on the recent pullback and is moving back up, and a Moving Average Convergence Divergence (MACD) indicator that is negative but improving towards a cross to positive, both

eBay, $EBAY

supporting an upward bias. There is support lower at 47.50 and 46.10 followed by 43.20 to 43.50. Resistance is higher at 49.25 and 50.50. The reaction to the last 6 earnings reports has been a move of about 4.93% on average or $2.40 making for an expected range of 45.90 to 50.70. The at-the money October Straddles suggest a roughly $2.75 move by Expiry with Implied Volatility at 90% above the historical at 25% and November at 37%.

Trade Idea 1: Buy the November 50 Call for $1.37.

Trade Idea 2: Buy the October 48/50 Call Spread for $0.90.

Trade Idea 3: Buy the October/November 50 Call Calendar for $0.70.
Selling the October 50 Call and buying the November 50 Call looking for the October call to expire worthless in 2 days

Trade Idea 4: Buy the November 45/50 bull Risk Reversal for $0.53.
Selling the November 45 Put and buying the November 50 Call

Trade Idea 5: Sell the October 46/50 Strangle for a $1.16 credit.
A bet on volatility bleeding out of the October options after the report with protection to a range of 44.84 to 51.16

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Dragonfly Capital Views Performance Through September 2012 Expiry

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