Wednesday, July 15, 2015

EBAY Analysis

Update 8/22/2015: My EBAY position expired Saturday. Shares fell 5.7% over 37 days, or a -56% annual rate. The options produced a 100.0% yield on debit for a +986% annual rate.

The online auction house eBay Inc. (EBAY), headquartered in San Jose, California, publishes earnings on Thursday before the opening bell.

[EBAY in Wikipedia]



Click on chart to enlarge.
EBAY at 10:30 a.m. New York time, 30 days hourly bars
Implied volatility stands at 34.2%, which is 2.6 times the VIX, a measure of volatility of the S&P 500 index. EBAY’s volatility stands in the 97th percentile of its most recent rise.

I shall use the AUG weekly series of options, which trades for the last time 37 days hence, on Aug. 21.

Ranges implied by options and the chart
WeekSD1 68.2%SD2 95%ChartEarns
Implied volatility 1 and 2 standard deviations; chart support and resistance, maximum earns move

The Trade

Iron condor, short the $67.50 calls and long the $70 calls,
short the $60 puts and long the $57.50 puts,
sold for a credit and expiring Aug. 22.
Probability of expiring out-of-the-money


The premium is $0.74, which is 30% of the width of the position’s wings.The stock at the time of purchase was priced at $63.66.

The risk/reward ratio is 2.3:1

The zone of profit in the proposed trade covers a $$3.75 move either way. The biggest immediate move after each of the past four earnings announcements was $3.77, and the average was $2.15.

Decision for My Account

I've opened a position in EBAY as described above.

-- Tim Bovee, Portland, Oregon, July 15, 2015


My volatility trading rules can be read here.


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Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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