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EBAY - eBay, Inc. - Buyers of weekly call options on eBay yesterday are seeing substantial overnight gains on their positions, as shares in the online marketplace provider move higher for a second consecutive session. The stock is up 2.2% at $51.21 this morning, helped higher by positive analyst comments, including an upgrade to 'Buy' from 'Hold' with a 12-month price target of $56.00 at Cantor Fitzgerald. The company also said it will update its fee structure for online merchants in an effort to make it simpler and more competitive with rival Amazon. Yesterday we noted heavy call buying in the Mar. 22 '13 $52.5 strike calls, with roughly 3,000 of the weekly contracts purchased at an average premium of $0.08 each during morning trading. Premium on the $52.5 weekly calls has tripled overnight to $0.24 as of 11:15 a.m. ET on Tuesday. Upwards of 3,200 of the $52.5 calls have changed hands this morning, and it looks like some traders may be bulking up on the bullish options, while others take quick profits off the table. The company holds its 2013 Investor/Analyst Day next Thursday in San Jose, California.

HOV - Hovnanian Enterprises, Inc. - Shares in U.S. homebuilder, Hovnanian Enterprises, rallied more than 7.0% to $6.43 this morning on strong housing starts and building permits data. Upside call buying on the stock near the open suggests some traders are positioning for shares in the name to extend gains in the near- and long-term. Traders looking for shares to edge to the highest level since the start of 2013 snapped up around 1,000 calls at the April $7.0 strike for an average premium of $0.125 today, and may profit at expiration next month in the event that HOV's shares gain more than 10% to settle above the average breakeven price of $7.125. Meanwhile, traders placing longer-term bullish bets on the homebuilder looked to options contracts expiring in January of 2014. Volume in far out-of-the-money calls caught our eye this morning, with upwards of 3,800 calls changing hands at the Jan. 2014 $10 strike. Most of the $10 calls appear to have been purchased at an average premium of $0.40 each, thus positioning buyers to profit at expiration next year should shares in Hovnanian jump 60% during the next ten months to top $10.40, the highest level since May of 2008.

ITB - iShares Dow Jones US Home Construction Index Fund - Options traders may be bulking up near-term bullish positions on the iShares Dow Jones US Home Construction Index Fund today, with shares in the ETF up as much as 1.9% in the early going to touch a new 52-week high of $24.35 on the heels of strong US housing data. The most actively traded options on the ITB this morning were the April $24 strike calls, where roughly 3,000 lots changed hands versus open interest of 4,571 contracts. It looks like most of the volume was purchased within minutes of the opening bell at an average premium of $0.85 each. Call buyers make money at expiration next month as long as shares in the ETF rally another 2.0% over today's high of $24.35 to exceed the breakeven point at $24.85. A review of trading traffic in the April $24 strike calls on Monday suggests roughly 900 of the contracts were purchased yesterday for an average premium of $0.65 apiece.

Source: Tuesday Options Brief: EBAY, HOV & ITB