Following an analyst upgrade in Early April, EBAY shares looked like they could be setting up for a bounce given its pull back from its post Q4 earnings 52-week highs, if the company were able to bear to beat and raise on their April 25th earnings announcement. At the time, we detailed a defined risk trade idea for those looking for a move back towards recent highs. From April 11th:
Trade Idea: EBAY ($40.65) Buy May 41 / 45 call spread for $1.25
-Buy to open 1 May 41 call for 1.60
-Sell to open 1 May 45 call at 35 cents
EBAY fell short of revenue estimates on yesterday’s announcement and as a result, the stock is lower today. With EBAY now 38.40 the May call spread is a total bust, worth just 0.15. That loss in the option are only slightly better than the stock but that shows the binary risk of a long premium trade into an event, the stock is down enough and the event has passed that the entire trade is pretty much worthless, even with 3 weeks left to expiration.
At this point, the only thing to do is to close for a loss and look for other opportunities.