Twitter was alive with the sound of eBay Inc (NASDAQ:EBAY) rumors today, and shares edged upward by more than 1% today. Several investors speculated on the micro-blogging site today that Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) was interested in acquiring eBay. Before you get excited though, it should be noted that these reports seem entirely unsubstantiated. It appears that this week the website eCommerce Bytes revived a suggestion made by one analyst back in March.
This isn’t the first time we’ve heard this rumor, as it popped up at least as early as March of this year. Analyst Colin Sebastian suggested that it could happen, although it was pure speculation at the time and still is. The New York Post even reported at one point that Microsoft Corporation (NASDAQ:MSFT) was interested in buying eBay Inc (NASDAQ:EBAY).
ValueWalk's Raul Panganiban interviews Kirk Du Plessis, Founder and CEO of Option Alpha, and discuss Option Alpha and his general approach to investing. Q1 2021 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors. Interview with Option Alpha's Kirk Du Plessis
Analysts comment on eBay – Google rumors
Today several users of Twitter Inc (NYSE:TWTR) said they were hearing “unconfirmed market chatter” of Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) making an offer of $65 per share for eBay Inc (NASDAQ:EBAY). It’s unclear where this so-called “market chatter” may have originated. There’s always a strong possibility that it’s just trolls trying to stir something up in the markets.
The rumors have even caught the attention of analysts, as Stifel analysts say a deal between the two companies makes sense but is unlikely. Analysts at Baird said the relationship between eBay Inc (NASDAQ:EBAY) and Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) could expand over time. That’s a reference to Google’s decision to finally allow Google Play shoppers to choose eBay’s PayPal as a payment option.
eBay options shoot through the roof
Analysts at Schaffer’s Investment Research noticed that options buying activity for eBay Inc (NASDAQ:EBAY) was substantially higher than the average today. They noted about 108,000 calls on the tape at one point, which they said was nine times the intraday average. They also noted that it was almost five times the number of puts that had changed hands at the time of the report.
The analysts found that nine of the 10 most active options are calls, and all but one of those expire within the next couple of months. As a result of all this activity, the analysts said eBay Inc (NASDAQ:EBAY)’s “30-day at-the-money implied volatility” soared 14.3% higher to hit 22.6%.
The May-dated series expired today at closing bell. Schaeffer’s said call investors targeted the $51.50 $52 and $52.50 strikes. They said most of the 24,145 contracts already traded at the time of their report were on the ask side and that volume outstripped open interest at every strike. They note that these last-minute options buys meant bulls believed eBay Inc (NASDAQ:EBAY) would keep pushing higher by the end of the trading day today. The stock closed out the day at $51.95 a share.
June, July calls also interesting
Schaeffer’s also pointed to a couple of June-dated calls at $55 and $57.50 strike prices. They saw 8,042 contracts at the first strike price and 5,792 at the second crossing the tape on out-of-the –money contracts, mostly at the asking price, which means buyers were probably driving the activity. They also noted that the IV was edging higher with each strike, suggesting that new positions were being initiated.
The last couple of active strikes they noted were the July 50 and $57.50 calls. They noted that one investor particularly seemed to target both strikes to create a long call spread. They said with this spread, the investor is hoping to see eBay Inc (NASDAQ:EBAY) close at $57.50 on July 18, which is the date the contract expires.