Yelp Inc (YELP): Takeover Chatter Sparks Bullish Betting

Buyout buzz continues to swirl around Yelp Inc (NYSE:YELP)

Sep 16, 2015 at 2:15 PM
facebook X logo linkedin


Yelp Inc (NYSE:YELP) was up nearly 4% at its session high, amid unconfirmed buyout buzz, but has since pared its lead to 0.9% to sit at $25.54. This isn't the first time takeover rumors have helped lift the stock, and the positive price action comes as a welcome development for the long-time laggard. This jump has certainly encouraged option traders, with calls trading at three times what's typically seen at this point in the day -- and outpacing puts by a 10-to-1 margin.

Most active is YELP's September 26 and weekly 9/25 27-strike calls, where it seems safe to assume new positions are being purchased. The volume-weighted average price (VWAP) for the front-month option -- which expires at this Friday's close -- is $0.43, while the VWAP for the weekly call is $0.51. Based on these average entry prices, the respective breakeven marks for the call buyers is $26.43 (strike plus VWAP) and $27.51.

Widening the sentiment scope reveals calls have been popular among the short-term options crowd. Specifically, YELP's Schaeffer's put/call open interest ratio (SOIR) of 0.62 ranks in the 35th annual percentile.

Drilling down on the front-month series, peak call open interest is found at the September 27 strike, where 5,836 contracts reside. However, according to data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the majority of options were sold to open here in recent months. In other words, traders are expecting YELP to remain south of the strike through this Friday's close.

Outside of the options pits, sentiment is tilted toward the skeptical side of the fence -- although it appears some are starting to shift sides. Among the 28 analysts covering the shares, 21 maintain a "hold" or worse recommendation. Additionally, although short interest declined 14.9% in the last two reporting periods, it still accounts for 16.2% of YELP's float.

As touched upon, this pessimism isn't too surprising, given Yelp Inc's (NYSE:YELP) long-term technical backdrop. Year-to-date, the shares have shed more than half their value. However, the equity has made some strides since bottoming at a two-year low of $20.50 on Aug. 24 -- up nearly 23%.
 

Unlock Weekend Profits with Chris Prybal's Favorite Strategy Up +487.5% in 2024

With the markets going left, right, and sideways, you need to have a plan now more than ever. 

Expert Trader Chris Prybal is no stranger to volatility, and has mastered finding big stock rallies while other traders aren't looking over the weekend. Rallies that produced gains like +207% on RTX calls, +236% on MARA calls, and +238% on NET calls.

A few simple moves on Sunday at 7pm could be the “Secret Sauce” your portfolio needs to not just stay afloat, but make unprecedented gains in this turbulent market.


Don’t sit on the sidelines, beat the market with Chris Prybal's strategy. Join him now!

 

 
 
 


 
 

Rainmaker Ads CGI