eBay, Inc. (NASDAQ: EBAY) shares are falling today on no obvious news, but after CNBC analyst and BloggingStocks.com's own Jim Cramer said on his Mad Money TV show last night that he could not get behind the company, and that someone should buy them "and put them out of their misery." When Cramer talks, people have a habit of acting, so this could be the reason for the company's swoon. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on eBay. After hitting a one-year high of $40.73 in October, the stock hit a one-year low of $23.52 last week. This morning, EBAY opened at $25.21. So far today the stock has hit a low of $24.75 and a high of $25.41. As of 1:45, EBAY is trading at $24.80, down 0.58 (-2.3%). The chart for EBAY looks bearish and steady, while S&P gives the stock its highest 5 STARS (out of 5) strong buy rating.
For a bearish hedged play on this stock, I would consider an October bear-call credit spread above the $30 range. A bear-call credit spread is an options position that combines the purchase and sale of call 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 8.7% return in three months as long as EBAY is below $30 at October expiration. eBay would have to rise by more than 20% before we would start to lose money. Learn more about this type of trade here.
EBAY hasn't been above $30 since May and has shown resistance around $28.50 recently. This trade could be risky if the economy starts to recover, but even if that happens, this position could be protected by resistance EBAY might find around its 200 day moving average, which is currently between $30 and $31 and falling.
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 owns nor controls positions in EBAY.
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Reader Comments (Page 1 of 1)
7-24-2008 @ 11:14PM
AVENGER said...
IT'S ABOUT TIME JIM CRAMER LISTENED TO ME... I DO BELIEVE HE FINALLY SEES THE LIGHT, ALBEIT A LITTLE LATE...
"EBAY LISTINGS PADDING = STOCK MANIPULATION!" - Wed Jul 23, 2008 7:47 AM PDT
"MAJOR PROOF OF EBAY COMMITTING "STOCK MANIPULATION" BELOW!!! DUMP,
DUMP THAT STOCK ASAP!" - Wed Jul 23, 2008 7:58 AM PDT
http://www.newsvine.com/_news/2008/07/14/1664258-ebay-beats-tiffany-in-court-case-over-trademarks?threadId=312961&cmt=2259428#c2259428
INFAMOUS EA! COMMENTS
__________________________________________
"UNDENIABLE PROOF OF EBAY FRAUD AND MOST IMPORTANTLY... STOCK MANIPULATION!"
http://www.marketwatch.com/news/story/tech-stocks-shake-off-ebay/story.aspx?guid=%7B9C510CBF%2D8C4A%2D4D53%2D8BB8%2DED1B0B9AB551%7D&dist=TQP_Mod_mktwN#comment425970
Avenger Posts 4-7!
___________________________________________
"HOW LONG CAN EBAY STAY AFLOAT?!"
COMMENT BY User 220016
POSTS: Jul 22 11:53 PM AND Jul 24 10:13 PM
http://seekingalpha.com/article/86191-paypal-merchant-service-major-source-of-growth-for-ebay
SIGNED,
INFAMOUS EBAY AVENGER!
7-24-2008 @ 11:23PM
Dave said...
I've been selling on ebay for 10 years now, sold thousands of cool and collectible items - worked great! But I'm leaving now - ebay has some pretty strange policies that seem to "demonize" sellers and leave them at the mercy of buyers. Seems some bright spark at ebay has come up with a "let's insult our sellers" bit of software. No recourse from ebay here. Bottom line is that if some post office in some faraway country is a tad slack, and a buyer complains about slow delivery, or he's just off kilter and complains for no reason - ebay automatically puts restrictions on the seller's account - despite the seller doing everything absolutely by the book - thanks ebay - makes the seller feel really good. Guilty until proven innocent - and no appeal. And I understand that the seller's new listings now get a lower preference in search results, so there seems little point in trying to resume with ebay. I sure wouldn't buy the stock. Ebid may be a friendlier home...
7-25-2008 @ 12:34PM
Patricia013 said...
Jim said it like it is. Sellers have been trying to tell wall street for months that Ebay is in trouble. Many sellers left - to be replaced with buy.com listings. Wacky new policies have forced small sellers and many powersellers into leaving. If this ship isn't turned around soon, its going to sink! Anyone thinking of investing in this company needs to take a good look at what is going on inside Ebay and it gets worse with each new illogical policy ebay spews out on almost a daily basis. Go to their discussion boards - speak to some of the sellers. Get the real picture. I think Mr. Cramer's advice is valid.
7-25-2008 @ 1:16PM
cathy said...
E-bay has bitten the hand that feeds it. I have aways tryed my very best to be 100 positive over 1000 +sells as a power seller now I am at the mercy ebay. I no longer have any rights and ebay does not care-period. I get knocked if a package is late because of the mail system and get black mailed from a buyer with a neg if I don't go along with what ever they want no fair play here why would I want to stay???
7-28-2008 @ 9:30PM
Mozelle said...
Today's headlines...
Australia's biggest eBay seller goes belly up! BANKRUPT! KAPUT! PLEITE!
Hundred's of people will not receive their merchandise! Hundred's more will lose their money!
NO ONE IS BUYING ON EBAY!
This is just the beginning! Other companies will follow shortly!
eBay Buyers or shoppers want everything for 99 cents! And free shipping! lol.
Way to go eBay!
Jim Cramer was right! Sell off eBay...
eBay is run by a ship of fools! Someone put this company out of it's misery!
7-29-2008 @ 2:18PM
heywood said...
Ebay is a dying company and anyone thinking of buying this stock had better go to the feedback message boards on ebay.com and read what buyers and sellers are saying about the new ebay.
Ebay is a very hard company to track as there is no possible way to feel the pulse of a once vibrant community other than the stock value and last quarters profit report.
Thde mass exodus of sellers will be followed by a mass exodus of buyers as the new CEO tries to turn the largest flea market in the world into wallmart.com/2.
Now that the economy is heading south the company has alienated its small seller base trying to create a "more retail experience" and completely forgetting what made the company a sucess in the first place.
8-03-2008 @ 11:55AM
treasurector said...
Ebays ridiculous feedback system is uncivilized to say the least. It is childish, selfish, emotional and prone to abuse as is the Paypal payment system and member ID applications/verification systems. Unrefined, immature and unacceptible. Ebay has just flat out lost its cool- and with all the higher fees, plus hidden, unmonitored, unverified and untrusted seller ratings, with cluttering ads, disclaimers and warnings everywhere...??!!
Trust, honor and respect are overboard and new forced unilateral concessions and gimmicks are the order of the day. Ebay has developed a nasty, distant personality that is turning off its clientele.
It will take a miracle of a development to recapture the hopes and trust of the savvy ecommerce participant.
Ebay is not where it could or should be.
Damaged and untrusted transaction systems have been fixed before in many agencies and businesses. Adopt the TRS Ver 9. TransactionReportSystem.
Visa could buy Ebay and fix it and then expand "trust score" reporting world wide. There is no other better system > Online or mobile instant consumer sentiment, reported and tracked for every product and service on a global scale at a single web portal. I am just a mechanic. Visa has the means to enact a unique numbering system for all their transactions for an expansion of the ebay rating model.
JW