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Option Brief: Overall call volume was slightly lower than usual in Yahoo! Inc.'s (NASDAQ:YHOO) option pits yesterday. However, a trio of March-dated strikes attracted considerable attention, namely the March 2014 34-, 32-, and 30-strike calls. Open interest for each option spiked overnight, indicating new positions were created.
Over 5,300 contracts traded at the highest of the three strikes -- also making it the session's most active YHOO option -- and 53% crossed at the ask price, suggesting they were purchased. In other words, yesterday's call buyers expect that the underlying -- currently trading at $36.67 -- will continue to muscle its way north over the next three-plus months. More specifically, based on the option's volume-weighted average price (VWAP) of $4.53, Monday's traders will begin to profit if the stock topples $38.53 (strike price plus VWAP).
The March 32- and 30-strikes also saw buyers swoop in -- per Trade-Alert data -- as traders paid additional premium for these in-the-money contracts to bet on Yahoo! staying north of the respective strike prices through March options expiration. Open interest grew overnight by more than 2,000 contracts at each of these strikes.
On the charts, Yahoo! Inc. (NASDAQ:YHOO) is a bona fide star. The shares have nearly doubled on a year-over-year basis. Moreover, during the past three months, the Internet giant has outperformed the broader S&P 500 Index (SPX) by 17.5 percentage points.