Updated with More Details. Ebay (EBAY, news, chart, volatility) is down 59 cents to $13.52 and options volume has jumped to twice the average daily levels, after an investor apparently opened a substantial ratio spread: buying 10,000 Jan-10 17.5 calls for $1.91 and selling 20,000 Jan-10 calls at the $22.5 strike for 76 cents. Both traded at 11:38 on the ISE. In addition, since volume exceeds existing open interest in both contracts, it looks like a new position.

With EBAY trading at $13.64, the ratio spread has a bullish payoff chart with significant profits possible if shares are substantially higher by January 2010 when the options expire. The strategist paid 39 cents (bought 1 of the 17.5 at $1.91 and selling two 22.5s for 76 cents). Excluding commissions, the maximum potential payoff is $4.61 if EBAY settles at $22.5 per share at expiration. The range of profitability at expiration is roughly between $17.90 and $27.10. Substantial losses are possible if the stock really rallies because there are twice as many short calls compared to long calls. For that reason, brokers normally require additional margin for this kind of ratio spread.