YHOO – Yahoo!, Inc. – Near-term bullish positions established on Yahoo yesterday are working for some options players on Friday, with shares in the name rallying as much as 4.5% this morning to $22.28, the highest level since July 2008. On Thursday, we noted upside call buying at the Mar. 08 ’13 $22 strike. More than 3,000 of the $22 strike weekly calls changed hands yesterday, with much of the volume purchased at an average premium of $0.11 per contract. Continued gains in the price of the underlying shares since then has pushed the value of those contracts up sharply overnight, with premium on the $22 strike calls nearly quadrupling to $0.40 as of 11:20 a.m. ET. Trading traffic in Yahoo weeklies this morning suggests some strategists are looking for short-term bullish positions to pay off next week as well. Volume in the Mar. 08 ’13 $22.5 strike calls is approaching 4,300 contracts versus open interest of 117 lots, and much of the volume appears to have been purchased in the early going for an average premium of $0.14 apiece. Buyers of the $22.5 strike call options may profit if shares in Yahoo continue to hit fresh multi-year highs next week.
MDR – McDermott International, Inc. – Shares in the provider of off-shore drilling platforms are down 13.75% at $10.97 this afternoon, wiping out all gains realized year-to-date, following the company’s fourth-quarter earnings report after the closing bell on Thursday. The company swung to a fourth-quarter profit, but projected 2013 revenue below average analyst expectations. A sizable position initiated in MDR puts ahead of the earnings report has benefited one strategist, with the value of the bearish options soaring overnight. It looks like the trader purchased 3,000 puts at the Mar. $12 strike yesterday afternoon for a premium of $0.30 per contract. The subsequent double-digit percentage drop in the price of the underlying lifted premium on the $12 strike put options to as high as $1.15 each this morning. The put buyer may have taken profits off the table earlier in the session given 3,200 of the $12 strike puts were traded this morning. It looks like most of the put options were sold during the first hour of the trading day for an average premium of $0.80 per contract.
FWLT – Foster Wheeler AG – Options on the engineering, construction and project management contractor and power equipment supplier are active today after the company reported lower-than-expected fourth-quarter earnings and revenue ahead of the opening bell. Shares in Foster Wheeler are down 16% at $20.20 as of 11:50 a.m. ET. Options traders bracing for further declines in the price of the underlying snapped up Mar. $20 strike puts, purchasing upwards of 1,000 lots at an average premium of $0.79 apiece. These contracts make money if shares in FWLT decline 4.9% from the current level of $20.20 to breach the average breakeven point on the downside at $19.21 by March expiration. Meanwhile, options players positioning to benefit from a rebound in the stock during the next couple of months appear to be putting premium to work in the April expiry calls. It looks like traders picked up a couple hundred calls at the April $23 strike, paying an average premium of $0.18 per contract. Call buyers may profit at April expiration in the event that Foster Wheeler shares surge 15% to top $23.18.