eBay Inc. (EBAY) 10/16/09 PriceWatch Alert Shows Bullish Technicals

Posted: Friday, October 16, 2009 8:05 AM EDT

eBay Inc. (NasdaqNM: EBAY) closed yesterday at $24.91. So far the stock has hit a 52-week low of $9.91 and 52-week high of $25.48. eBay stock has been showing support around 24.53 and resistance in the 25.57 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 25 covered call (XBA DE) for a net debit in the $22.25 area. That is also the break even stock price for this trade. This covered call has an 183 day duration, provides 10.68% downside protection and a 12.36% assigned return rate for a 24.65% 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 25 call (XBA DE) for an $8.24 debit. The trade has an 183 day life and would provide 6.70% downside protection and a 21.36% assigned return rate for a 43.00% annualized return rate (for comparison purposes only). eBay does not pay dividends at this time. [FBB-Seven Summits Research]

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