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Option Briefs: Near-Term Bulls Pounce on Yahoo! Inc. (YHOO)

YHOO sees a jump in November call volume

by 8/23/2013 1:49 PM
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Yahoo! Inc. (NASDAQ:YHOO) is seeing an influx of bullish options activity today, as roughly 28,000 calls have crossed the tape thus far -- almost double the norm. By contrast, fewer than 6,600 puts have changed hands. Additionally, the stock's 30-day, at-the-money implied volatility (IV) is up 0.5 percentage point (1.8%) from yesterday's close. It looks as though at least one speculator is wagering on the Internet concern to ascend past the $29 mark within the next few months.

Jumping right in, nearly 10,250 calls have traded at the November 29 strike -- most of which crossed in one large block for an ask price of $1.27 each. Today's volume has exceeded current open interest levels at this strike, while IV has ticked higher, signaling the creation of new positions.

In order for the trader to secure a profit, YHOO must rise above the breakeven rail of $30.27 (strike price plus the initial premium paid) by November expiration. This represents an increase of 8.2% from the stock's present perch at $27.98.

The delta for this call is currently docked at 0.44, meaning it has a 44% chance of moving into the money ahead of the close on Nov. 15. However, even if YHOO remains south of the $29 level throughout the option's lifetime, the most today's bulls stand to lose is the initial premium paid. Also of note, the equity's Schaeffer's Volatility Index (SVI) of 26% ranks lower than all but 31% of similar readings taken during the past year, suggesting the stock's near-term options are relatively inexpensive at the moment.

Technically speaking, Yahoo! Inc. (NASDAQ:YHOO) has surged close to 41% year-to-date, and more than 88% on a year-over-year basis. On the charts, the shares continue to trade atop their 20-week moving average, which has acted as support for nearly a year.


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