WeputtheEBAYstructureonabout2weeksagowiththethoughtthatEBAYwouldlikelyberangeboundafterearningsgiventhetechnicalsupportaround$50,butthepoorfundamentaloutlookafteraweakearningsreport?

Thestockhasindeedremainedrangebound,andourcallflyisupalmost50%asaresult?

However,sinceDanalsohasaDeccallflyinEBAYnow,wedecidedtotakeourprofitsonthistrade,especiallysincethebulkoftheremainingdecaywilloccurmuchclosertoexpiry。

Action?

SoldtoCloseEBAY($52。

35)Nov15th50/52。

5/55CallFlyat$1。

05fora$0。

34gain

OriginalPostOct17th,2013?

NewTrade$EBAY–TheBuyItNowOption

DandiscussedEBAYinhisMorningWordearliertoday?

Thekeytakeaway:

Aswehighlightedinthe?

MorningWordonMonday,marketparticipantswanthighgrowthatanypriceinthecurrentenvironment?

SoevenifEBAYoffersdecentgrowthatareasonableprice,investorsarenotwillingtogiveitthebenefitofthedoubtliketheyarewithotherinternetcompanies。

Havingsaidthat,we’reonthelookoutforhowthestockreactsaroundthecrucial$50level?

Ifitshowssignsofholding,wemighttakeashotonthelongside,sincevaluationisstillreasonableforacompanygrowingsalesandearningsata15%clipperyear。

Thestockdidinfactholdthe$50levelthismorning,promptlybouncingaftertheopenasbuyersshoweduponcemore?

However,EBAYsweakresultslikelymeanthataV-shapedreboundisnotinthecardsthistimearound?

Withthatinmind,butalsowithacheapvaluation(especiallyforaninternetstock)providingnear-termsupport,heresourtrade:

TRADE:EBAY($51。

53)BoughttheNov50/52。

5/55CallFlyfor$0。

71

-Bought1Nov50Callfor2。

40

-Sold2Nov52。

5Callsat1。

03

-Bought1Nov55Callfor0。

37

Break-EvenOnNovExpiration:

-Profitsofupto1。

79btwn50。

71and54。

29。

Maxprofitof1。

79at52。

5

-Lossesofupto0。

71btwn50and50。

71andbtwn54。

29and55,withmaxlossesof0。

71above55andbelow50。

TradeRationale:

Aswithmanyofourin-the-moneycallflies,thisisnotatradethatwillmakemoneyimmediately?

ItwilltaketimeforthetradetobleedinthedecayaslongasEBAYremainsbetween50and55?

Giventhestrongsupportat50andlikelyresistanceinthe54areaduetothemanymovingaveragesandtheearningsgap,welikeourodds,particularlysincewereonlypaying0。

70forthefly?