Yahoo shareholders have been using options to hedge against a sudden pullback
Options trading has been brisk on
Yahoo! Inc. (NASDAQ:YHOO) in recent weeks, per data from Schaeffer's Senior Quantitative Analyst Rocky White. In fact, YHOO stock has seen some of the highest options volume over the last 10 sessions, with 323,399 calls and 337,712 puts traded. Echoing this, call open interest is docked in the elevated 87th annual percentile, with 452,339 contracts open, while the 424,505 puts that are currently open is at a 52-week peak.
This explosive options volume is continuing today, with 199,224 contracts traded so far -- eight times what's typically seen, and on track to settle in the 100th annual percentile. Puts have a slight edge over calls, with 101,544 of the former and 97,680 of the latter on the tape.
A bulk of today's activity has centered on the weekly 6/23 60-strike call and put, and June 60 call and put. Specifically, 119,735 contracts have collectively traded here, or 60% of the day's total options volume. This just mirrors the recent action seen in YHOO's options pits, with a combined 399,471 new positions initiated at these four strikes over the last two weeks.
Data from the previous 10 sessions suggests some of these calls and puts were used to initiate a collar as part of an
options hedge, to guard a long stock position against a sudden near-term drop in YHOO. Today, with Yahoo shares soaring on tailwinds from Alibaba Group Holding Ltd (NYSE:BABA), a portion of of the intraday options activity appears to be indicative of YHOO shareholders rolling these collars up, considering opening activity has been detected at the June 70 call and put.
At last check, Yahoo stock was trading up 7.5% at $54.36, and earlier hit a 16-year high of $55.35. Boosting the shares is a positive reaction to
BABA's revenue forecast, given YHOO's 15.5% stake in the e-commerce company. Yahoo shareholders are also expected to vote on
Verizon's planned acquisition of its core internet business, with reports suggesting the combined company -- which will be called Oath -- will result in up to 1,000 job cuts at YHOO and AOL.