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Put Volume Picks Up on Outperforming Yahoo! Inc. (YHOO)

Yahoo! Inc.'s weekly 2/28 37.50-strike call is being bought to open today

by 2/26/2014 3:10 PM
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Put volume has been picking up speed in Yahoo! Inc.'s (NASDAQ:YHOO) options pits in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for example, the equity's 10-day put/call volume ratio of 0.32 ranks in the 60th percentile of its annual range. In other words, puts have been bought to open (relative to calls) at an accelerated clip.

In today's session, the most active position on the put side is the weekly 2/28 37.50 strike, where a healthy portion of the 3,892 contracts traded have done so at the ask price. Implied volatility has ticked higher, and volume outstrips open interest, pointing to buy-to-open activity.

By initiating the long puts, today's speculators are betting on YHOO to move south of the $37.50 mark by this Friday's close. Should the equity maintain its perch atop this area over the next two-plus sessions, speculators can rest easy knowing the most they have risked is the initial premium paid. According to Trade-Alert, the volume-weighted average price for the short-term calls is $0.19 apiece.

Technically speaking, Yahoo! Inc. (NASDAQ:YHOO) has been a strong outperformer, besting the broader S&P 500 Index (SPX) by nearly 44 percentage points year-over-year. More recently, the stock entered a brief period of consolidation after hitting a multi-year peak of $41.72 in early January, but appears to have resumed its longer-term uptrend. Heading into the final hour of the session, the equity is up 0.9% at $37.59.


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