eBay Inc. (EBAY) 9/30/09 PriceWatch Alert Could Hit 23.74% Return

Posted: Wednesday, September 30, 2009 8:38 AM EDT
By: Market Intelligence Center Staff

eBay Inc. (NasdaqNM: EBAY) closed yesterday at $23.87. So far the stock has hit a 52-week low of $9.91 and 52-week high of $24.74. eBay stock has been showing support around 23.41 and resistance in the 24.19 range. Technical indicators for the stock are Bullish and S&P gives EBAY a neutral 3 STAR (out of 5) hold rating. EBAY appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at an Apr '10 24 covered call (QXB DE) for a net debit in the $21.25 area. That is also the break even stock price for this trade. This covered call has a 199 day duration, provides 10.98% downside protection and a 12.94% assigned return rate for a 23.74% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the EBAY Jan '11 15 Call (OYI AC) and selling the Apr '10 24 call (QXB DE) for a $7.23 debit. The trade has a 199 day life and would provide 6.87% downside protection and a 24.48% assigned return rate for a 45.00% annualized return rate (for comparison purposes only). eBay does not pay dividends at this time. [WBA-Seven Summits Research]