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September 18, 2013  Wed 4:14 AM CT

EBAY: SEE CHART GET CHAIN FIND STRATEGIES
Option volume surged in eBay yesterday as an investor crafted a complex bullish strategy in the online auction giant.

Almost 50,000 contracts changed hands in the session, compared with 12,400 on a typical day. The largest trade involved the November 57.50 calls and the November 50 puts. Some 12,000 of the calls were purchased for $1.10 and roughly 4,100 of the puts were sold for $0.81. Volume was more than 4 times the previous open interest at each strike, indicating that new positions were initiated.

Owning calls lock it the price where shares can be purchased, while selling puts generates income and creates an obligation to get long at lower prices. Combining the two trades creates a position that's similar to owning stock, profiting to the upside and losing money to the downside.

The unusual aspect of yesterday's transaction is that more calls were bought than puts sold. It cost about $1 million to open the trade but controls the equivalent of more than $24 million in stock based on the delta of the contracts. (See our Education section)

EBAY rose 1.83 percent to $54.63 yesterday and has spent all year churning near its previous high from 2004. The shares gapped lower after the last two earnings reports, but both times buyers stepped in to defend the $50 level. That could make investors comfortable writing puts at that strike.
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