Yahoo has been running higher, and the option paper is going
through the roof.
Our Heat Seeker monitoring system has shown repeatedly bullish
activity in the Internet stock, starting with the weekly 31 calls
. Traders paid $0.32 to $0.45 with the shares down around $31. They
doubled just hours later as YHOO pushed higher and have now more
than quadrupled to more than $1.80!
The trades are continuing fast and furious today, pushing total
volume in the company toward 360,000 contracts. Not only is that 7
times greater than average, but calls outnumber puts by a
head-spinning 10-to-1 ratio.
"MASSIVE yahoo Jan 35 x 40 spread trades for about a buck,"
optionMONSTER co-founder Jon Najarian thundered on our premium
InsideOptions Pro chat room halfway through the morning. He was
referring to a huge trade
expiring early next year that will earn roughly 400 percent if YHOO
reaches $40 by the third Friday of 2014.
The shares were at $32.04 when the transaction hit, but pushed
higher and are now up 4.82 percent to $32.85. He or she has
effectively locked in $35 as an entry price and will have to exit
for $40 if it reaches the top of that range. It only cost about $1
to control that $5 move. (See the discussion of
section for more.)
YHOO appears to be entering the second phase of a monster run that
began one year ago--about three months after hiring Marissa Meyer
as its CEO. The rally marked an end to a bear market in a stock
that had languished since the dot-com bubble broke more than a
It paused between May and late August, consolidating on either side
of $27, but now seems to have broken that resistance. The next key
area looks to be the late 2005 peak of about $40--exactly the level
targeted with today's call spread.
Other trades have been winners as well. Back on
, Heat Seeker showed buying in the January 34 calls for about
$0.70. Those shot up to more than $1 a month later and are now bid
at $2.36. Then on July 23, the October 29-July 30 call spread was
suggested for $0.35 during tradeMONSTER's closed-door
Market Action webinar
. It's now worth $0.80, and will inflate to a full $1 if YHOO
remains above $30 for the next 3-1/2 weeks.
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