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Yahoo! Inc. (NASDAQ:YHOO) has been a technical standout lately, gaining about 27% year-to-date, and roughly 65% over the past 12 months. What's more, the shares have bested the broader S&P 500 Index (SPX) on a relative-strength basis during the past three months. Nevertheless, a group of short-term option bears are targeting the stock today, with hopes that the Internet giant will retreat into territory not explored on a daily closing basis since mid-March.
Of the 7,950 puts that have crossed the tape thus far, 1,616 have changed hands at the September 23 strike -- the bulk of them at the ask price, suggesting they were bought. These out-of-the-money contracts traded at a volume-weighted average price (VWAP) of $0.66. Since this strike doesn't hold any open interest at present, it's likely that new bearish bets are being initiated here.
In order for speculators to secure a profit from their bought-to-open puts, YHOO must fall south of breakeven at $22.34 (strike price less the VWAP) by September expiration. This represents a decrease of about 11.7% from the equity's current price of $25.29. The delta for these puts is docked at 0.25, implying they have a 25% chance of moving into the money ahead of the close on Sept. 20.
However, Monday's call activity notwithstanding, today's bearish attitude is more of the same for Yahoo. In fact, the stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.44 ranks higher than 90% of similar annual readings, signaling traders have picked up puts relative to calls at a faster clip just 10% of the time during the past year. This bevy of pessimistic bets -- particularly at the underfoot July 23 strike, which holds open interest of around 13,600 contracts -- could end up translating into options-related support in the near term.
Meanwhile, sentiment among the brokerage bunch mirrors that of the options crowd. Only 11 analysts have deemed Yahoo! Inc. (NASDAQ:YHOO) worthy of a "buy" or better rating, compared to 14 "holds" and one "sell" suggestion. This leaves the door wide open for a wave of future upgrades, which could boost the security even higher.