Options Activity Alert: YHOO, MSI, AZN

YHOO – Yahoo!, Inc. – Shares in Yahoo!, Inc. are up better than 5.0% this morning, though not on the back of Facebook’s highly anticipated IPO. YHOO’s shares rose as much as 6.3% to $15.87, the highest since Valentine’s Day, on reports the company is in talks to potentially sell its stake in Chinese Internet Company, Alibaba Group Holding Ltd., for an estimated $7 billion. Options traders positioning for shares to continue to rise are targeting weekly call options, perhaps on speculation a deal could be announced as early as next week. Call buyers snapped up more than 3,100 lots at the May 25 ’12 $16 strike for an average premium of $0.21 apiece and another 420 contracts at the higher $17 strike at an average premium of $0.07 each. Traders long the $16 and $17 weeklies may profit at expiration next Friday if shares in YHOO rally another 2.1% and 7.6% to top average breakeven prices of $16.21 and $17.07, respectively. Bullish action spread to the June expiry calls as well, with more than 8,000 of the $16 strike contracts purchased for an average premium of $0.52 each. The value of the call options could certainly lose their value, however, should talks fizzle out and shares surrender the day’s gains.

MSI – Motorola Solutions, Inc. – No sign of May flowers for investors in Motorola Solutions, Inc., with shares in the provider of data communications and telecommunications equipment down roughly 9.0% since the start of the month. A burst of put buying on MSI this morning suggests some traders expect the price of the underlying shares to continue to slide in the near term. Shares in Motorola Solutions are currently down 0.85% at $47.47 as of 12:00 p.m. in New York. Put buyers looked to the June $47 strike, picking up around 1,200 lots at an average premium of $1.41 apiece, and more than 3,200 put options at the lower June $46 strike at an average premium of $0.93 each. Traders long the $47 strike put start making money should MSI’s shares decline another 4.0% to breach the average breakeven point at $45.59, while $46 strike put options are profitable given a 5.1% bearish move in the share price to $45.07. Executives at Motorola Solutions are scheduled to speak at the Barclays Global Technology, Media and Telecommunications Conference next Wednesday and the Sanford C. Bernstein Strategic Decisions Conference on June 1st.

AZN – AstraZeneca PLC – Put buying on the maker of Crestor and other brand name pharmaceuticals this morning suggests shares in the name, which currently trade 0.60% lower on the session at $41.41, may have further to fall in the next four weeks. AstraZeneca popped up on our scanners today after roughly 1,000 puts were purchased at the Jun. $40 strike for a premium of $0.46 each. The trader or traders snapping up the contracts are prepared to profit at June expiration should the price of the drug maker’s shares decline another 4.5% to settle below the breakeven point at $39.54.

About Caitlin Duffy 373 Articles

Affiliation: Interactive Brokers

Caitlin Duffy joined Interactive Brokers in 2009. In her role as Equity Options Analyst, Caitlin provides daily market commentary; highlighting various options trades, trading patterns and strategies of interest. Through Interactive Broker's webinar program, Ms. Duffy presents a number of educational, options-related events describing the theoretical pricing of options, the option Greeks as well as options strategies.

Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.

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