Call Players Eye Yahoo! Inc. (YHOO) on News of $5 Billion Bids

Yahoo! Inc. (YHOO) is higher today on news that bids for the company's core business are coming in at or above $5 billion

Jun 9, 2016 at 11:52 AM
facebook twitter linkedin

Yahoo! Inc. (NASDAQ:YHOO) is getting a boost today, up 0.7% at $37.21, on reports that the company has received multiple bids at or above $5 billion for its core business. This should come as good news to shareholders, who were disappointed by late-May reports that bids were expected to fall in the $2-$3 billion range. But with a final round of bidding to begin next week, it's still anybody's guess as to what the final sale price, or assets included in the sale, will be. Meanwhile, the stock's options pits are busy, as speculators weigh in on the news.

Specifically, YHOO calls are changing hands at roughly 1.3 times their expected intraday rate. Calls also account for nine of the stock's 10 most active options, though some of the action may be coming from traders closing out their positions. This includes the June 40 call, which is YHOO's most popular strike, with more than 4,100 contracts on the tape.

Also active are the stock's July 40 and weekly 6/10 38-strike calls. Buy-to-open action is likely transpiring on both options, suggesting short-term traders expect more upside from YHOO through the respective expiration dates.

That said, traders may want to be cautious about making big bets on a YHOO breakout. Though the stock has added more than 12% year-to-date, it has been stuck between the $36 and $38 levels since late March, as the future of the company hangs in the balance. Nonetheless, the overall sentiment picture is relatively bullish.

Of the 26 analysts providing coverage on the stock, 18 maintain a "buy" or better rating, without a single "sell" on the books. And short sellers have been abandoning their positions recently, with short interest on YHOO falling by 22% during the last two reporting periods.

In the options pits, optimism also prevails, as calls have been bought to open at nearly four times the rate of puts in recent months. In fact, the stock's 50-day call/put volume ratio across the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits higher than three-fourths of the past year's reading, at 3.63. Likewise, Yahoo! Inc.'s (NASDAQ:YHOO) Schaeffer's put/call open interest ratio (SOIR) of 0.26 -- in just the 6th percentile of its annual range -- shows that near-term traders are near a call-skewed extreme.

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical  levels, and top economic stories straight to your inbox.

Stop leaving money on the table with the same old broken options trading approach...

There is no options strategy that more perfectly capitalizes during earnings season better than this simple call and put buying strategy. Perfect for aggressive traders looking to recover their suffering portfolios so far in 2022. With the simplest possible options strategy, Schaeffer's team with 100+ years of options trading excellence, target 200% gains on every single trade. So many trades are being beaten down by the market, but don't be one of them! Don't waste another second... join us right now before the next trade is released! 

Best stocks for October and worst stocks for October


Special Offers from Schaeffer's Trading Partners