Forget Timing the Bottom: Earn 8.9% While You Wait for EBAY on Sale
At about $113.01 a share, eBay (EBAY) is trading near its 52W high.
Do you think EBAY stock is a good long-term bet at current levels? What about at a 30% discount at about $80 per share? If you think that is a steal, and have some cash ready to go, here is a trade.
8.9% annualized yield at 30% margin of safety, by selling Put Options.
- Sell a long-dated Put option expiring 3/19/2027, with a strike price of $80
- Collect roughly $334 in premium per contract (each contract represents 100 shares)
- That’s about 4.9% annualized yield on the $8,000 you’re setting aside for the possibility of buying the stock
- This cash parked in a savings or money market account will earn an extra 4.0%, taking total yield to 8.9%
- And you give yourself a chance to buy EBAY stock at deep discounted price of $80
Possible Trade Outcomes: You Win Either Way
| Stock Price Outcome | What It Means For You |
|---|---|
| EBAY stays above $80 | You keep the full $334 premium – 4.2% extra income over the next 310 days on cash that might otherwise earn you 4.0% or less. You never buy the stock and simply walk away with the cash. |
| EBAY closes below $80 | You’ll be obligated to buy 100 shares at $80. But thanks to $334 premium, your effective cost basis is just $76.66 per share – a roughly 32% discount from current level. |
But to hold this trade with conviction, you want to better under what’s going well for EBAY stock and how low it has fallen in the past.
Complementing Your Active Trades
Executing a cash-secured put on EBAY is a highly efficient way to engineer yield and optimize your entry point. It is a sophisticated play for active investors. But sustainable wealth building also requires a passive, structured engine.
For investors looking to complement their active trades with a hands-off compounding vehicle, the Trefis High Quality (HQ) Portfolio is the solution. It is engineered to capture market upside across 30 high-conviction stocks, and has delivered over 105% in cumulative return since inception.