eBay (EBAY) Stock Drops to $65 Ahead of 2025 Earnings: Option Traders Brace for Volatility
Explore how eBay's (EBAY) stock price has fallen below its 20-day moving average with rising put option volumes signaling bearish sentiment ahead of the 2025 earnings report, while unexpected positive results could trigger a sharp rebound.
In the weeks leading up to eBay Inc.'s (EBAY) fiscal second-quarter earnings announcement for 2024, investors have driven the stock price down to a notably low range, trading near $65. This movement is accompanied by an unusual surge in put option volumes, suggesting that traders are bracing for a potentially disappointing earnings report. However, if eBay surprises with strong results, the stock could experience a rapid upward correction.
The open interest shows a significant dominance of put options over calls, with option premiums elevated beyond typical levels. This pattern indicates that traders are hedging against downside risk by buying puts and selling calls. Should these bearish bets be unwound following a positive earnings surprise, eBay's share price could see unexpected upward momentum.
Forecasting stock direction post-earnings remains challenging, but the current divergence between stock price action and option activity provides valuable insight. If eBay delivers better-than-expected results, the stock may climb back toward its 20-day moving average, reversing recent declines. This scenario arises because options are currently priced for a downturn, leaving room for a swift price rally if the news defies expectations.
Key Insights
- eBay's stock price has declined sharply, closing well below its 20-day moving average ahead of earnings.
- Put options outnumber calls in open interest, signaling bearish sentiment among traders.
- Option premiums suggest traders expect a significant move, predominantly downward.
- Volatility-based support and resistance levels indicate potential for a strong upward price move.
- This environment presents a trading opportunity if earnings surprise positively.
The chart below illustrates eBay's price action as of August 9, highlighting the setup leading into the earnings report. The stock reached an all-time high above $74 in late July before plunging to around $65 in early August, signaling investor caution.
Recent Trends
Over the past month, eBay's stock has shown high volatility, with a sharp peak in late July followed by a swift decline well below its 20-day moving average. The 20-day Keltner Channel, based on Average True Range (ATR), highlights this drop, reflecting waning investor confidence as earnings approach.
The ATR, typically calculated over 10 to 20 periods (two to four weeks), measures historical volatility and helps traders assess price movement magnitude. The recent downward trend below the 20-day moving average underscores growing market concern.
Option Market Activity
Option traders are positioning for continued volatility, with over 120,000 call options and nearly 164,000 put options in open interest. On a recent Monday alone, more than 31,000 puts were traded versus 15,000 calls, reinforcing bearish expectations. However, the relatively balanced pricing ranges for calls and puts suggest no overwhelming conviction about the earnings outcome.
The 10-day Keltner Channel set at four times ATR reveals key support and resistance zones, indicating that while the market anticipates a significant move, there remains potential for either a strong rally or a further decline depending on earnings results.
Post-earnings, eBay has historically experienced notable price swings, such as a 10% drop following the previous report before a gradual recovery. Given the broad volatility range, investors should prepare for potentially larger-than-expected price movements in either direction.
Market Implications
eBay's earnings results often influence broader internet retail sector stocks and major ETFs. A strong performance could buoy peers like Etsy, Wayfair, and MercadoLibre, as well as ETFs such as the First Trust NASDAQ Retail ETF (FTXD), Invesco QQQ Trust (QQQ), and the SPDR S&P 500 ETF Trust (SPY). Conversely, disappointing results may weigh on these related securities.
Stay informed with the latest updates and analysis as eBay's earnings approach, and consider how option market dynamics might signal upcoming price action opportunities.
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