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Bullish Traders Keep Flocking to Yahoo! Inc. (YHOO)

Front-month calls are in focus among today's Yahoo! Inc. traders

by 6/12/2014 3:04 PM
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Yahoo! Inc. (NASDAQ:YHOO) option traders are displaying a strong preference for calls over puts this afternoon. By the numbers, 54,000 calls are on the tape, versus just 15,000 puts. Meanwhile, short-term contracts are in demand, as the stock's 30-day at-the-money implied volatility (IV) has risen 3.7% to 32.1%.

Along those lines, the most active YHOO strike by a wide margin is the in-the-money June 35 call. Roughly 25,300 contracts -- including several large blocks -- have changed hands here, almost all at the ask price, suggesting they were bought. What's more, IV is up and volume outstrips open interest, hinting at buy-to-open activity.

Based on the calls' volume-weighted average price (VWAP) of $1.79, the buyers expect YHOO to keep traveling north, and finish above $36.79 (strike plus VWAP) by the closing bell next Friday, when front-month contracts expire. From the stock's current perch at $36.53, that breakeven mark is less than 1% away. The traders will rack up additional gains with each step north of $36.79, while the most they have to lose is the premium paid, should the shares finish below the strike at the end of next week.

Today's preference for long calls is business as usual in Yahoo's options pits. The stock's 50-day call/put volume ratio of 4.21 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the 71st percentile of its annual range.

This bias for bullish bets over bearish isn't shocking, either. Yahoo! Inc. (NASDAQ:YHOO) is a technical stalwart, advancing roughly 41% in the past year. What's more, this week, the shares are on pace to close above their 20-week moving average for the first time in over three months. This trendline previously served as a layer of support from the end of 2012 through March 2014, and could now guide YHOO to higher highs.


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