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PayPal Options Volume Surges as Traders Bet on Rebound Despite 12% Stock Plunge
Shares of PayPal Holdings Inc. (PYPL) plunged after reports of a potential takeover deal collapsing, but options market data reveals a surge in bullish bets from traders positioning for a rebound. Despite the stock's sharp decline, call volume significantly outpaced put volume, indicating that many market participants anticipate a price recovery.
Bullish Bets Emerge in Options Market
By mid-morning, trading activity in PayPal options had swelled to 134,092 contracts, a volume well above typical levels, according to Investing.com. The activity was heavily skewed toward bullish sentiment.
- Total Options Volume: 134,092 contracts
- Call Volume: 90,372 contracts (bullish bets)
- Put Volume: 43,720 contracts (bearish bets)
This activity resulted in a call-to-put ratio of more than 2-to-1. Much of the trading consisted of new positions, particularly in near-term call spreads like the October $60/$67.50 spread. This strategy suggests traders are betting on a modest, limited-upside recovery rather than a full reversal to previous highs.
Volatility Spikes as Takeover Premium Vanishes
AdThe market is now pricing in greater uncertainty for PayPal's stock. Three-month implied volatility rose to 37.16%, an increase of 3.91 percentage points. This signals that options traders expect larger price swings in the coming months.
Furthermore, the event caused a collapse in the stock's call skew, which measures the relative demand for out-of-the-money calls versus puts. According to the source, the skew fell sharply by 7.01 percentage points, indicating that the speculative premium once attached to a potential takeover has been wiped out of the options pricing.
Context: Stock Performance and Valuation
The surge in options trading came as PayPal's stock fell nearly 12% to $54.20. The decline was attributed to the collapse of a rumored acquisition deal, which removed a key potential catalyst for the stock.
Following the drop, PayPal trades at a trailing price-to-earnings ratio of 11.1x, with an analyst consensus price target of $60.57, according to data cited by Investing.com. While the options market is positioning for a near-term bounce, the widespread use of risk-defined spreads suggests traders remain cautious about the company's longer-term trajectory.
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