(NASDAQ:YHOO) has seen about 24,000 calls change hands as of 12:16 p.m. EDT, and more than one-third of them can be traced to a single block of January 2014 20-strike calls. At 11 a.m. EDT, one investor traded 9,100 YHOO LEAPS
near the ask price of $4.88, meaning that he or she bought them. Moreover, information from the International Securities Exchange (ISE) indicates the initiation of new long call positions.
With the shares of Yahoo! currently trading at $24.02, the LEAPS are safely in the money. That doesn't mean that they're profitable, however. For the January-dated options to land in the black, YHOO needs to climb to $24.88 (strike price plus premium paid) by expiration; if it doesn't, the most this morning's bullish speculator has on the line is the initial net debit.
Yahoo! has had a rough go of it in the options pits lately, with a few notable exceptions
. The equity's ISE/Chicago Board Options Exchange (CBOE)/NASDAQ OMX PHLX (PHLX) 50-day put/call volume ratio finds a home in the 70th percentile of its annual range, suggesting a healthier-than-usual appetite for puts over calls.
On top of that, sentiment among analysts covering the acquisition-oriented
Internet name is stacked against it. Eleven brokerages give YHOO a "buy" rating or better, compared to 15 "holds" or worse.
The pessimism is brow-raising, given the stock's technical fortitude. In spite of a three-day pullback, Yahoo is up more than 21% year-to-date and 54% year-over-year, both of which handily outpace the broader S&P 500's
(INDEXSP:.INX) performance in the same time spans. Additionally, the shares are approaching potential round-number support at $24, as well as their 100-day moving average located in the same neighborhood. Should the underlying find a foothold atop that mark, an unwinding of bearish bets could fuel a contrarian rally.
Fundamentally, the company's annual shareholders' meeting is scheduled to kick off tomorrow morning.
This article by Alex Eppstein was originally published on Schaeffer's Investment Research.
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