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Yelp Option Bulls Take Profits

Open interest depleted at YELP's in-the-money September 18 call

by 9/4/2012 10:12 AM
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It looks like a few option bulls cashed in their chips on Yelp Inc (NYSE:YELP - 21.97) on Friday. During the course of the session, the online-review operator saw roughly 18,000 calls change hands -- more than three times its average daily call volume, and more than twice the number of YELP puts traded.

Garnering the most attention was the in-the-money September 18 call, which saw nearly 12,300 contracts cross the tape. A healthy portion of the calls traded at the bid price, and call open interest at the front-month strike depleted over the weekend, hinting at sell-to-close activity. In other words, the September 18 call holders were taking profits on their winning positions.

Widening our sentiment scope, bears still outnumber bulls in the options pits, despite YELP's relatively surprising post-lockup surge last week. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock sports a 10-day put/call volume ratio of 2.24, indicating that traders have bought to open more than two YELP puts for every call during the past couple of weeks. Likewise, the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.38 tells us that puts outnumber calls among options expiring within three months.

Much of the aforementioned surge was attributed to a short-squeeze situation, as bears rushed to cover their losing bets. In fact, there were plenty of skeptics likely ruing their pessimistic positions, with short interest accounting for nearly one-fifth of YELP's total available float.

Analysts, meanwhile, remain lukewarm in their opinion of YELP. Currently, all three of the brokerage firms following the stock offer up middling "hold" recommendations. Meanwhile, the consensus 12-month price target stands at $26.67, implying expected upside of 21% to YELP's closing price of $22 on Friday.

In early trading, YELP has explored both sides of breakeven, with the shares last seen in the $21.97 vicinity.


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