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Put Sellers Pile On Yahoo! Inc. (YHOO)

Friday's Yahoo! Inc. put selling is more of the same for the Internet titan

by 4/28/2014 10:32 AM
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Option traders targeted Yahoo! Inc. (NASDAQ:YHOO) calls at nearly double the pace of puts on Friday. Nevertheless, the most active option was the weekly 5/9 33.50-strike put, where more than 14,500 contracts changed hands.

The activity, however, wasn't powered by the typical bearish put buyers. Rather, with the majority of the contracts trading off the bid, and open interest surging over the weekend, it's safe to assume the positions were initiated by neutral-to-bullish put sellers. This has been a trend in recent weeks. In fact, over the past 10 sessions on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), puts sold to open have more than doubled those bought to open -- 66,285 contracts to 32,182.

By writing the aforementioned weekly puts, the traders expect YHOO will maintain its foothold atop the 33.50 strike through the closing bell next Friday, when the weekly options expire. However, if the stock drops below that level during the next two weeks or so, the speculators could be assigned, and forced to buy the shares for $33.50 apiece, no matter how much they're worth.

On the charts, Yahoo! Inc. (NASDAQ:YHOO) is 0.4% higher this morning to trade at $34.62, bringing its year-over-year gain north of 40%. If this positive price movement continues, it could change some opinions on the Street -- where nine brokerage firms still maintain tepid "hold" ratings on YHOO. In other words, analyst-induced tailwinds could help send shares of the Internet giant higher.


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