Is Yahoo About to be Sold?

This just may be a good time to make a bullish play on Yahoo. According to the following article there’s a good chance that they may be selling part or all of the company. If they do, they expect the stock to jump from under $16 to $19 per share. If it does, it could make for a nice payday for you if you play it right.

Yahoo! Inc. options traders are pushing implied volatility to its lowest pre-earnings level in two years as investors focus on the possibility that the largest U.S. Internet portal will sell assets or be sold.

The key gauge of options prices for Sunnyvale, California- based Yahoo fell to 33.67 yesterday, the lowest level since May and the least for the day before an earnings release since January 2010, according to data on 30-day contracts compiled by Bloomberg. That compares with a one-year average of 45.42. Yahoo’s implied volatility was 17.03 points above the level for the Technology Select Sector SPDR Fund as of yesterday, 29 percent below the average.

Jerry Yang last week exited the Yahoo board and its management team, the latest casualty of an overhaul that led to the ouster of Chief Executive Officer Carol Bartz. Yahoo has considered selling its stakes in its Asian partners, including Alibaba Group Holding Ltd., and has fielded proposals from private equity groups to sell a stake in itself.

“It’s breathtaking how low the volatility is,” Ophir Gottlieb, managing director of client services at San Francisco- based Livevol Inc., a provider of options-market analytics, said in a telephone interview yesterday. “There’s so much going on with Yahoo.”

The ratio of outstanding calls to buy versus puts to sell rose to 2.48-to-1 on Jan. 20, the highest level since January 2009, according to Bloomberg data. February $16 calls had the biggest increase in ownership in the last seven days, adding 34,337 contracts to 110,523, the data show. April $16 calls and July $19 calls had the biggest open interest among all options. The shares declined 1.8 percent to $15.68 yesterday.

Chance of Sale

“People are only in this for the chance of Asian asset sale or sale of the company,” Joe Kunkle, founder of, a Boston-based provider of options-market analytics, said in a telephone interview yesterday. “They’ve been targeting a move to $19.”

Analysts estimate the company will report a fourth-quarter profit of 24 cents a share excluding some items, according to the average of 27 projections in a Bloomberg survey. That would be a 6.5 percent drop from the same period a year ago. Yahoo!’s implied one-day earnings move is 3.9 percent, compared with an average change of 4.2 percent the day after the last eight quarterly releases.

Dana Lengkeek, a Yahoo spokeswoman, declined to comment on the options trading.

“Volatility is low overall for earnings because Yahoo is not an earnings story,” Alex Panagiotidis, managing director for equity derivatives at Sterne Agee & Leach Inc. in New York, said in an interview yesterday. “It’s all about sell the company or not.”

Complete article can be seen in Business Week

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