YHOO trade going into tommorow

Discussion in 'Trading' started by pandabear, Apr 21, 2008.

  1. Looks like the YHOO spreads are really cheap.

    May 30-32.5C is around .6
    May 27.5-25P is around .5

    With the earnings and MSFT deadline this friday isnt YHOO finally going to move? These things seem to be giving a nice 100% return on a big move on either side.

  2. Probably won't move big one way or the other
  3. Why?
  4. You think the volatility would be high both ways? Good earnings or bad earnings?
  5. Atleast there is a floor that can't be breached which is microsoft's offer.
  6. A lot of the reasoning around this trade is around these factors.

    If YHOO beats the numbers tommorow, it should easily go upto 30's consider the perception on the street. If Microsoft does decide to follow, YHOO will trade around 31-32 a share if they raise the bid upto 34. If for some reason MSFT drops the bid, you should be protected on that side too.
  7. i actually like buying yhoo puts more than anything else. upside is very limited for yhoo but downside is pretty big on a yhoo miss. tech trader in barron's made a good point when he said that it is hard to argue that yhoo is more than $14 stock if msft pulls their bid.

    i've been trying to figure out my risk tolerance on this trade since there is the obvious possibility that it does nothing. not sure if i am getting into it yet but i think the risk/reward is excellent.
  8. Historically for the past five years Yahoo almost never beats. Yahoo is a basket case.
  9. The reward far outweighed the risk. You should have picked up some.

    disclosure- long 50 22.5 puts
  10. Man this sucks ...

    I closed my position on friday. Got out of the Call spread at .8 and the put spread at .6 ...

    Oh well made a little more money than I would have than the worst case scenario trade that just occured ...
    #10     May 4, 2008