After hitting a one-year low of $28.60 in January, the stock hit a one-year high of $40.73 in October. EBAY opened this morning at $32.44. So far today the stock has hit a low of $32.16 and a high of $32.80. As of 11:05, EBAY is trading at $32.66, up 0.99 (3.1%). The chart for EBAY looks bearish and steady, while S&P gives the stock a very positive 5 STARS (out of 5) strong buy rating.
For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $30 range.
A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in just one month as long as EBAY is above $30 at January expiration. eBay would have to fall by more than 8% before we would start to lose money.
EBAY hasn't been below $30 since January and has shown support around $31 recently. This trade could be risky if the holiday retail season turns out to be very weak, but even if that happens, this position could be protected by strong support the stock has formed just above $30, where it bottomed out 3 times over the past year.
Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither controls a bullish hedged position in EBAY.