Yahoo is falling on a bad earnings report, but one investor is
betting on a rebound.
optionMONSTER's Heat Seeker tracking system detected the purchase
of 35,000 January 16 calls for $0.64 and the sale of an equal
number January 12.50 puts for $0.77. It was the largest trade to
cross our monitors so far today.
YHOO fell 7.89 percent to $14 in afternoon trading and has lost
about 24 percent of its value since mid-April. The Internet-media
stock gapped lower at the open after a decline in banner ads caused
second-quarter revenue to miss analysts' forecasts.
Today's option trade generated a credit of $0.13 and will simulate
a long position in the stock. It will make money if YHOO pushes
toward $16 by expiration and lose money if it falls below $12.50.
If the shares remain between the two strikes, the position will
expire worthless and the investor will keep the small credit.
Despite today's decline, the stock seems to have important support
around $13.90 and also around $12.50. That may have given the
investor the confidence to sell the puts around this level.
There is also selling in the October 12 puts and the August 13
puts. Overall in the name, more puts are sold than bought, and
purchases accounted for the bulk of call volume, according to Heat
That reflects a general belief that YHOO is near a bottom and that
a rebound is more widely expected than further downside.
More than 148,000 contracts have changed hands in the name so far
today, more than seven times the average amount.
(Chart courtesy of tradeMONSTER)