Yahoo's 5-Year Low Draws Rebound BetsShares of Yahoo Inc. slid to a five-year low Thursday, and options traders appeared eager to bet on a rebound.
Trading in Yahoo options leapt to four times the normal level as investors picked up 168,000 calls that allow them to buy the company's stock and 19,000 puts that allow them to sell it, according to Track Data.
Traders convened around October calls for most of the session, showing particular interest in October $25 calls and October $30 calls. The former are priced at about 15 cents and make money if Yahoo shares pull above $25.15 before Oct. 17. Yahoo closed at $17.75 a share, falling 5.4% in 4 p.m. Nasdaq Stock Market composite trading.
Looking further ahead, one trader pursued a "call spread" in January contracts -- buying January $22.50 calls and selling twice as many January $27.50 calls. Priced at about 50 cents, the positions make money if Yahoo climbs above $23.
In many cases, options traders appeared to be getting in position for a noteworthy event that could boost Yahoo's share price, experts said.
With the stock trading well below the $33 price that Microsoft Corp. offered for Yahoo, the company's board -- now staffed with activist investor Carl Icahn and two of his allies -- might feel compelled to oust Chief Executive Jerry Yang, they said.
Other experts said that Microsoft CEO Steve Ballmer could make another attempt to acquire Yahoo before year's end, which would also prompt an upward move in the company's stock.
"Ballmer might come back when the price gets low enough because he knows he needs the platform," said Paul Foster, a strategist with TheFlyOnTheWall.com.
Several Plays Made in Intel Options
Traders pounced on Intel Corp. amid a broad-based selloff in semiconductor stocks. Intel shares have fallen 10% since last Friday's close, and closed the Thursday session at $20.52, down 4.7%, in 4 p.m. Nasdaq Stock Market trading.
Trading in Intel jumped to three times the normal level Thursday, as investors picked up 168,000 calls as well as 50,000 puts.
While the calls outnumbered puts more than 3 to 1, which suggests bullish activity, most traders appeared to be selling the calls.
They unloaded large numbers of September $21 calls, in particular.
Analysts said the activity suggests that traders think the stock will start to stabilize or that the shares are unlikely to climb above $21 apiece before Sept. 19.
By: Tennille Tracy
Wall Street Journal; September 5, 2008
