Yahoo! Inc. (YHOO) Calls Active Amid Merger Talk, Search-Market Share

Yahoo! Inc. (YHOO) is higher today, amid a handful of fundamental developments

Jan 8, 2015 at 11:59 AM
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Bulls have been increasing their presence in Yahoo! Inc.'s (NASDAQ:YHOO) options pits of late. Since the start of the calendar year, 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 risen to 4.66 from 4.31. What's more, the current ratio ranks in the 81st percentile of its annual range, meaning calls have been bought to open over puts at a faster-than-usual clip in recent weeks.

It's a similar set-up in today's session, with calls trading at 1.5 times what's typically seen at this point in the day, and are outpacing puts by a more than 4-to-1 ratio. Most active is YHOO's weekly 1/30 55-strike call, where one block of 2,350 contracts went off at the same time as a symmetrical block of February 55 calls. According to Trade-Alert, the former was bought to open, and it appears the latter was sold to close, as one speculator adjusted her bullish bet, expecting YHOO to hit a fresh 14-year high by month's end.

Today, the shares are up 2.2% at $49.65 -- extending their year-over-year advance to 21.3% -- amid a number of well-received fundamental developments. For starters, YHOO's recent win over Google Inc (NASDAQ:GOOGL) as the default search engine for Mozilla's Firefox has resulted in increased search-market share for the former -- and a subsequent slip in the same metric for the latter. Additionally, traders are taking a glass-half-full approach to a letter sent to Yahoo! Inc.'s (NASDAQ:YHOO) board of directors by Starboard Value, once again encouraging the tech titan to pursue a merger with AOL, Inc. (NYSE:AOL).

Daily Chart of YHOO Since January 2014
 

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