Trade Alert - (EBAY) August 4, 2020 - BUY
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.
Tech Trade Alert - eBay Inc. (EBAY) – BUY
BUY eBay Inc. (EBAY) August 2020 $50-$53 in-the-money vertical BULL CALL spread at $2.65
Opening Trade
8-4-2020
expiration date: August 21, 2020
Portfolio weighting: 10%
Number of Contracts = 38 contracts
This is a short-term trade that eBay will stay above $53 in 16 days. I believe in this e-commerce company after the takeover by Elliot Management.
The pandemic has boosted online shopping platforms such as eBay and Amazon.com Inc. even though double-digit unemployment has hurt the overall economy. In the second quarter, eBay reported gross merchandise volume, the value of all goods sold on its platforms, increased 26% to $27.1 billion from a year earlier. The company said it added 8 million new active buyers to end the quarter with 182 million. Analysts, however, projected almost 184 million.
Chief Executive Officer Jamie Iannone said the company stepped up marketing, which helped it attract tens of thousands of new small businesses looking for ways to reach shoppers when their locations shut down. That helped eBay meet the demand for items like masks and hand sanitizer initially and later products including laptops, office furniture, and fitness equipment as more people worked from home and gyms closed.
About 80% of the increased gross merchandise volume was generated by existing customers shopping more frequently and spending more on the site, eBay said.
The remaining 20% came from new shoppers.
If you don’t do options, take a pass on this one.
Here are the specific trades you need to execute this position:
Buy 38 August 2020 (EBAY) $50 call at………….………$6.27
Sell short 38 August 2020 (EBAY) $53 call at………….$3.62
Net Cost:……………………..……...............………..…….....$2.65
Potential Profit: $3.00 - $2.65 = $.35
(38 X 100 X $.35) = $1,330 or 13.30% in 17 days
To see how to enter this trade in your online platform, please look at the order ticket below, which I pulled off of Interactive Brokers.
If you are uncertain on how to execute an options spread, please watch my training video by clicking here.
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.
Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.