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Most Active Options Update: Yahoo! Inc. (YHOO)

YHOO is seeing notable options trading activity today

by 7/24/2013 2:42 PM
Stocks quoted in this article:

The 20 stocks below have attracted the highest options volume -- in the front three-months' series -- during the past 10 trading days. The companies highlighted are those that are new to the list since the last time the study was run. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Three names of notable interest this afternoon are Yahoo! Inc. (NASDAQ:YHOO), Ford Motor Company (NYSE:F), and Dell Inc. (NASDAQ:DELL). Call volume has moved to four times the average intraday volume on the heels of F's well-received earnings report, while put volume has swelled to more than five times the expected rate on DELL as anticipation builds around next week's special shareholder vote. The meeting, originally rescheduled for today, has been postponed until Aug. 2. Elsewhere, here is a quick look at today's interesting activity in YHOO's options pits.

Most

Yahoo! Inc. (NASDAQ:YHOO) has been the focus of call players in recent weeks, and today's option activity is no exception. Roughly 26,000 calls have changed hands thus far, or more than four times the number of puts exchanged. While one speculator is eyeing additional upside over the long-term by buying the January 2014 31-strike calls for a volume-weighted average price (VWAP) of $1.02, she is also hedging her bullish bet by simultaneously selling the January 2014 36-strike calls for a VWAP of $0.33. Several large blocks totaling 14,000 contracts have traded at these out-of-the-money strikes, and data from the International Securities Exchange (ISE) confirms both buy- and sell-to-open activity, respectively. Summing it all up, it appears a long call spread was initiated for a net debit of $0.69. By implementing this strategy, the trader will begin to accumulate a profit with each step above breakeven at $31.69 (bought strike plus the net debit) YHOO takes through January expiration. However, the maximum potential reward is capped at $4.31 (the difference between the two strikes less the net debit), regardless of how far north of $36 YHOO may travel over the next six months. Risk, meanwhile, is limited to the net debit incurred.

Given Yahoo's impressive 78.2% year-over-year advance, it's not surprising for option players to be optimistic toward the stock. The sentiment is not so sanguine elsewhere on the Street, though, which could translate into a contrarian boon for YHOO down the road. No fewer than 17 out of 27 analysts maintain a "hold" or worse suggestion toward the stock, while the consensus 12-month price target of $28.93 is a slim 5% premium to YHOO's current perch at $27.51. An additional round of upgrades and/or price-target hikes could add fuel to the stock's fire.


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