Stocks quoted in this article:
Internet titan Yahoo! (YHOO – 42-1/2) is feeling more like the Titanic today, as it has sunk to levels not seen since mid-November 1998. Catalyzing the equity's 13-percent drop today was a morning report from brokerage house Morgan Stanley Dean Witter. The firm noted that YHOO has a 30-percent chance of missing
earnings estimates, due to a slow-down in Internet advertising revenue. The analyst went on to state that YHOO has the potential to fall short of expectations not only next quarter, but in the first two quarters of 2001 as well.
Put activity has accelerated as a result of the equity's latest plunge. Most notable is the volume on deep-in-the-money options in the January series. Around 2,000 contracts have traded on both the January 125 and 130 puts, while 10,500 contracts have swapped hands on both the 185 and 210 puts in the back-month series. The January 145 and 150 puts have both scooped up 1,000 contracts today. Given the outlandish expense of the contracts (83 per contract and above) and the large block sizes, this is probably the work of an institutional investor. Additionally, these blocks are likely related, given the similarity in block sizes.