This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

EBAY: Ready to Catch a Bid?

eBay (EBAY; $28.75) began as one great modern idea that became one excellent modern corporation. The stock "IPO'd" in 1998. EBAY's early years of hyper trading have morphed into the mature stock it has become. No longer does the stock have a mega-high beta (1.37) with this year's low of $27 and the high $35 means $30 has become the fulcrum.

EBAY does own PayPal, an acquisition that has paid off in excellent fashion for EBAY! EBAY basically has zero debt as its cash on hand exceeds its total debt by over $1.5 billion. Thus management can be understood as prudent, and somewhat conservative.

Technically, I will leave EBAY to T3 to discuss, with the only addendum to their excellent analysis is that I have EBAY coiled. Thus, I am expecting a higher volatility in the stock over the next several weeks.

Fundamentally, I have EBAY only growing at a 10% annual rate of return in this current quarter. Trading at 20X P/E, that 10% growth makes the stock quite rich as this time. However this current quarter also ends its fiscal year which should show growth year- over-year over 15%. Should that become fact, that tempers the big differential between the P/E ratio and the actual rate of growth for EBAY.

Let's review the T3/OP video with Jill and Scott before we get into the trade:

The trade set up I prefer for EBAY at this time is the bullish call vertical spread as it controls risk 100%. In addition, the sale of the out-of-the-money call part of this type of spread helps pay for the decay on the long call side of the spread.

This trade does have medium reward potential, though the gain potential is capped due to that same short call involved.

Consider a bullish vertical call on EBAY that expires in January.

Trades: Buy to open 3 EBAY January 28 calls for $2.50 and sell to open 3 EBAY January 33 calls at $0.50.

The total risk for the spread is the premium paid, or $2.00. Given the fact that EBAY is $0.75 in-the-money relative to this spread, the risk is nicely exceeded by the reward potential.

This content brought to you by TheStreet's OptionsProfits. CLICK HERE FOR A 14-DAY FREE TRIAL.

On Saturday, December 3, the CBOE Option Pit and OptionsProfits are hosting a full-day course dedicated to mastering strategies for trading the VIX. CLICK HERE FOR INVITE AND TO REGISTER.

OptionsProfits can be followed on Twitter at

T3Live can be followed on Twitter at

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $95.01 0.00%
AMZN $488.10 0.00%
EBAY $22.48 0.00%
FB $99.75 0.00%
GOOG $682.74 0.00%


Chart of I:DJI
DOW 16,027.05 -177.92 -1.10%
S&P 500 1,853.44 -26.61 -1.42%
NASDAQ 4,283.7530 -79.3910 -1.82%

Free Reports