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Will eBay be the next Yahoo?

David Russell (david.russell@optionmonster.com)

eBay has been hammered along with other Nasdaq stocks, but some investors are hoping that it could be the next Yahoo.

optionMONSTER's Heat Seeker monitoring program has detected bullish activity in the last two sessions as investors focus on potential catalysts that could light a fire under the slow-moving e-commerce stock.

Yesterday EBAY drew a vertical spread in the May 55 and 60 calls, with the potential to earn profit of more than 300 percent if the stock closes at $60 or higher by expiration. It's already inflated about 40 percent so far.

EBAY traded a lot like YHOO did in most of 2012, shuffling in a range before CEO Marissa Meyer spurred a rally by seeking to monetize its undervalued investment in Alibaba. EBAY, for its part, owns the fast-growing PayPal business, which activist investor Carl Icahn wants to see spun off into a new company. Management has rebuffed his demands so far.

EBAY is up 0.97 percent to $55.33 in afternoon trading, on the heels of a 3.5 percent gain yesterday. The online auction giant rallied hard in February after on the Icahn news but then retreated in March as investors dumped former high-flying Nasdaq stocks like YHOO and Netflix.com. The online auction stock is now trying to bounce around the middle of the same range where it traded all of last year.

Today's option activity remains aggressively bullish. This time traders bought about 8,300 May 57.50 calls for about $1.34. Some 3,600 of those were matched against May 52.50 puts that were sold for $0.91, as investors created synthetic long positions with the potential for significant leverage if EBAY continues higher. But those short puts also pose substantial risk, as traders will be obligated to buy shares if they fall below $52.50. (See our Education section.)

More than 67,000 contracts have changed hands in EBAY so far today, 2.5 times its daily average for the last month. Overaall calls outnumber puts by a bullish 7-to-1 ratio, according to optionMONSTER data.

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