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Yahoo! Inc. (YHOO) Put Volume Accelerates Ahead of Earnings

Yahoo! Inc. will report quarterly earnings after the close on April 15

by 4/4/2014 9:34 AM
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Option Brief: Put players were active in Yahoo! Inc.'s (NASDAQ:YHOO) options pits yesterday, with volume running at a 41% mark-up to the intraday average. The most active strike was YHOO's April 35 put, as a number of speculators either bet on the stock to falter in the near term, or perhaps protected their portfolios against such a scenario.

Of the 11,897 contracts traded here -- including a large block of 7,443 -- nearly three-quarters switched hands on the ask side. Implied volatility rose 1.8 percentage points on the day, and the vast majority of the volume translated into open interest overnight, the most of any strike. In other words, it seems safe to assume that new bearish positions were initiated. Delta for the put closed at negative 0.38 last night, suggesting a less than 2-in-5 chance the position will be in the money at the close on Thursday, April 17, when front-month options expire.

Considering YHOO has rallied more than 52% year-over-year to trade at $35.76 -- helped by its supportive 160-day moving average -- a portion of yesterday's activity at this out-of-the-money strike may have been at the hands of shareholders initiating protective puts, particularly against any earnings-induced downside. The Internet issue is slated to report its quarterly results after the April 15 close -- two days before the puts expire. Scheduled events such as earnings are frequently a catalyst for a stock's price action.

Looking ahead, the equity could find itself an options-related foothold at the $35 level. This strike has been popular among speculators, and is now home to peak put open interest in the April series. Heavy accumulations of put open interest can often translate into a layer of support, as the hedges related to these bets unwind ahead of expiration. At present, more than 45,500 contracts rest at Yahoo! Inc.'s (NASDAQ:YHOO) April 35 put.


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