Good News for Short-Term Yahoo! Inc. (YHOO) Bulls

Yahoo! Inc.'s weekly 12/26 52- and 52.50-strike calls are being bought to open today

by Karee Venema

Published on Dec 22, 2014 at 10:43 AM
Updated on Apr 20, 2015 at 5:32 PM

Call players have set their sights on Yahoo! Inc. (NASDAQ:YHOO) this morning, with the options crossing the tape at 1.1 times the average intraday pace. Short-term contracts are in high demand, too, as evidenced by the equity's 30-day at-the-money implied volatility, which is up 6.9% to 35.5%.

Drilling down, YHOO's weekly 12/26 52- and 52.50-strike calls have seen the most action, and it appears a healthy portion have been bought to open. In other words, these speculators are betting on the equity to be perched above the respective strikes at week's end, when the series expires. A close north of $52.50 would be a first in 14 years for YHOO.

Widening the sentiment scope reveals options traders' appetite for long calls has been growing in recent weeks. Since Dec. 5, in fact, YHOO's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio has grown to 4.46 from 3.87. Plus, the current ratio ranks in the 76th annual percentile, meaning calls have been bought to open over puts at a faster-than-usual clip.

This bullish positioning shouldn't be too surprising, given the stock's technical tenacity. Year-to-date, the equity has rallied nearly 27% to trade at $51.31. What's more, YHOO took a critical bounce off its 40-day moving average last week. According to Schaeffer's Senior Quantitative Analyst Rocky White, in the seven other instances in which the security pulled back to this trendline over the past three years, Yahoo! Inc. (NASDAQ:YHOO) has gone on to average a five-day gain of 1.3%, and is positive 71% of the time.

Daily Chart of YHOO Since January 2014 With 40-Day Moving Average

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