Options Report: Bullish Put Trading On Yahoo! And Excite
By Steven M. Sears
NEW YORK (Dow Jones)--The short-term future of two Internet stocks is very bullish according to
traders' interpretation of bold moves made Monday in Yahoo! Inc. and Excite Inc.
A firm, identified only as a major Wall Street trading house, sold thousands of Yahoo! and Excite put
options, which indicates that both stocks are expected to rally higher, traders said.
The strategy, probably executed for a client, is profitable if the underlying stock prices rise. If the stocks
trade lower, the firm would have to buy the stocks - about 750,000 shares of Yahoo! and 500,000 of
Excite.
The trades shocked some traders who feel the rapid rise of Internet sector stocks defies reason. Other
traders dismiss such talk as discounting the long-term business prospects of Internet companies.
"Our jaws are hanging on our chests," a Yahoo! trader at the Chicago Board Options Exchange said.
The trade he referred was the sale of 7,500 November 150 puts. "There's so much risk in that. He's
making a statement that this stock is not going below 150," the trader said. Yahoo! stock was recently
up 7 1/2 at 161 1/16.
The put fell 2 7/8 to 2 3/8 on volume of 8,024 contracts, compared with composite open interest of 671
contracts.
At another CBOE trading pit, the same firm sold about 5,000 November 40 puts on Excite. "We hear
that he's just really bullish," an Excite trader said.
The put fell 1 11/16 to 9/16 on volume of 5,308 contracts, compared with composite open interest of
1,059 contracts.
Elsewhere in the options market:
- As the U.S. government's antitrust trial continues as Microsoft Corp., traders are becoming
increasingly bullish. "Given the chart, it's a possible breakout," one trader said, referring to a stock chart
that shows the software maker's stock has moved above its 10-day moving average of 106.65
Microsoft's most active option, the November 115 call, was recently flat at 1 on volume of 12,113
contracts, compared with open interest of 14,839 contracts.
- The option market's fear gauge, the Chicago Board Options Exchange Market Volatility Index, or
VIX, was recently up 2.48, or 10%, to 27.10. |
