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Option Brief: Yahoo! Inc. (NASDAQ:YHOO) bounced off of its 200-day moving average yesterday to finish with a gain of 5.4%. As such, bullish betting accelerated in the Internet maven's options pits, where call volume roughly quadrupled put volume. Against this backdrop, the stock's 30-day at-the-money implied volatility (IV) spiked by 12.1% to 38.9%, indicating strong demand for short-term YHOO options.
Most active, however, was the equity's longer-term January 2015 45-strike call, where 27,583 contracts were exchanged -- the majority at the ask price, suggesting they were bought. IV rose at the strike, and open interest added nearly 22,000 contracts overnight, making it safe to assume fresh bullish bets were initiated. In sum, these traders expect YHOO to rally north of $45 -- a level not toppled since late 2000 -- by next January. However, even if the contracts remain out of the money throughout their lifetime, the most the call buyers have on the line is the initial premium paid.
On the fundamental front, Fidelity Investments' Contrafund revealed this morning that it reduced its stake in Yahoo! Inc. (NASDAQ:YHOO) by 28% last quarter. The news has the shares off 0.8% to trade at $35.55. Nevertheless, on a year-over-year basis, the stock remains up about 44%, and boasts double-barreled support from the aforementioned trendline, as well as the $32-$33 area. This region buoyed the stock last fall, and has once again emerged to offer support in recent weeks.