Without any notable news from
Yahoo! Inc. (NASDAQ: YHOO )
, shares of the Internet company are on the rise today. At least
one investor appears to have rolled down a long call position. This
options action maintains bullishness but scales back the upside
bet.
YHOO shares closed up 19 cents to $14.59 on Thursday. The stock
is trading 6% off its 52-week low of $13.75 and roughly 23% off
its' 52-week high of roughly $19 (reached in April). YHOO is
scheduled to announce earnings figures on July 20 after the market
closes, and analysts estimate earnings of 14 cents a share. Call
volume on the tape suggests one investor expects the stock to be
trading slightly higher than its current level at January 2011
options expiration.
At 11:34 a.m. EST, a block of 5,000 January 2011 14 calls
changed hands for $1.92 per contract, which was the ask price at
the time of this trade. At the same time, the same number of
January 17.5 calls changed hands for 58 cents per contract, which
was one cent below the bid price when the volume hit the tape. The
lower-strike calls are home to current open interest of 419
contracts while current open interest of the higher-strike calls is
82,000 contracts. It looks like an investor sold to close the
January 17.5 calls and simultaneously bought to open the January 14
calls to maintain bullish exposure to the stock but rolled down to
a lower strike betting the stock will not climb as much as the
original long position called for. Investors will make money on
this roll if YHOO shares are trading higher than $15.34, and could
theoretically make unlimited gains if the stock continues to the
upside. If YHOO shares drop below the strike price and are trading
lower than $14 at expiration, the investor loses the entire premium
paid per roll.
The January 14 calls are trading at an implied volatility of 36%
compared to the stock's 30-day historical volatility of 28%. You
can assess implied volatility levels and create visuals of
risk/reward dynamics of this call roll and other stock and option
plays by opening a free
virtual trading account today.