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Yahoo! Inc. (YHOO) Put Selling Heats Up

Yahoo! Inc. traders sold weekly puts on Wednesday

by 4/24/2014 10:15 AM
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Yahoo! Inc. (NASDAQ:YHOO) edged 1% higher out of the gate, but was last seen fractionally lower at $35.36, as Wall Street digests the latest round of big-cap tech earnings. However, one group of options traders yesterday gambled on short-term support for YHOO, initiating neutral-to-bullish bets.

The stock's out-of-the-money weekly 5/9 33.50-strike put saw open interest surge by 8,150 contracts overnight -- the most of any strike. However, of the 8,628 contracts traded here on Wednesday, three-quarters did so at the bid price, suggesting they were sold. By writing the puts to open, the sellers expect YHOO to remain north of $33.50 through the close on Friday, May 9, rendering the options worthless at expiration. In this best-case scenario, the sellers will retain the entire net credit collected at initiation.

The affinity for sold puts merely echoes the recent trend. Over the past 10 sessions on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), YHOO traders have sold to open more than 1.8 puts for every one bought. Broadening the time frame to 50 sessions, the ratio is even higher at 2.1. Of course, many of those bets may have been placed by traders looking to exploit pricey premiums ahead of YHOO's recent turn in the earnings confessional.

As alluded to earlier, Yahoo! Inc. (NASDAQ:YHOO) shares were last seen fractionally lower, despite an initial jump into the black. From a longer-term perspective, the equity has rallied more than 43% during the past year, and just executed a successful test of its 50-week moving average, which has ascended into the aforementioned $33-$33.50 region.


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