eBay Inc. (EBAY) shares have hit 52-week highs today as a lawsuit against Skype is dropped and shares were upgraded at Kaufman to a Buy. Shares are trading 15X forward earnings, and estimates seem too low for a company still seeing growth in core assets like Skype and PayPal, with the ability to spin off these assets as well. Earnings are set for October 21st and November call action is exploding, as 17,677 November 426 calls and 25,087 November $27 calls trade against low open interest with shares at $25. A massive block of over 1.3 million shares traded around the same time so a large covered call position is responsible for much of the volume. The 200 week EMA at $27.50 is the next resistance area that coincides with the 38.2% Fib level. Implied volatility is relatively cheap at 43% considering the 15% move after last quarter’s results.
-Joe Kunkle, OptionsHawk.com
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