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eBay draws bearish earnings bet

Chris McKhann (chris.mckhann@optionmonster.com)

A large trade appears to be looking for eBay to drop after reporting earnings next week.

optionMONSTER's Depth Charge system detected the purchase of 5,000 January Weekly 52 puts for $1.62 and the sale of 5,000 January 47 Weekly puts for the bid price of $0.18, both contracts that expire on Jan. 24. The volume was above open interest in each strike, indicating that this is new trading.

The vertical spread cost $1.44 to open, which is the maximum amount at risk in the trade. The maximum gain would be $3.56 if EBAY is below $47 at expiration in . (See our Education section)

EBAY is up 0.14 percent to $52.62 this morning. The online auction house hit a low near $48 in late November and was testing resistance at $55 at the end of 2013.  

Fourth-quarter earnings are scheduled to be released on Jan. 22 after the close, two days before today's puts expire. The bearish play follows huge call roll up to the 56 strike in the same expiration, which was posted late last month on InsideOptions Pro.

Overall puts in the name outnumber calls by nearly 6 to 1 so far today.

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