Options traders aren't finding much to entice them to play
options ahead of the Internet portal titan's earnings report to be released after the close Tuesday.
Perhaps traders aren't convinced that Yahoo! shares have bottomed out just yet, despite having reached a 52-week intraday nadir Monday morning when it cratered at $75.50. The handful of traders taking positions in Yahoo! options Monday were paying up for the opportunity, that's for sure.
Typically, traders watch pre-earnings options traffic to determine where professional money managers are speculating, and subsequently, where quarterly results will land.
Yahoo! shares were off $3.19 to $78.06. The
First Call/Thomson Financial
32-analyst consensus estimate calls for Yahoo! to earn 12 cents a share in the third quarter.
Investors in Yahoo! better hope its numbers blow away Wall Street, considering that the stocks of compaies that have issued earnings warnings have been pummeled mercilessly this fall. Arguably, if Yahoo! revenues or earnings aren't up to par, investors will hammer on the stock even more.
With Yahoo! stock suffering Monday, the price of Yahoo! put options -- those used to speculate on further downward movement -- has surged. The out-of-the-money October 75 puts were up 1 3/8 ($137.50) to 5 7/8 ($587.50) on the
Chicago Board Options Exchange
A put option is a type of option that gives the purchaser the right but not the obligation to sell a security for a specified price at a certain time and is basically a wager that the security will sink.
Despite the recent relentless selling in stocks, options analysts continue to bemoan the lack of pessimism showing up in some options market indicators.
While there may be anecdotal stories of pessimism and fear in the market among traders, they are not showing up in some gauges of market fear that options pros watch.
For example, the CBOE equity put/call ratio was only at 0.63 this morning, hardly a display of fear on the part of investors. Jay Shartsis, options strategist at
in New York, said that 0.63 was not that impressive. He'd like to see two or three days of the put/call ratio in the 90s.
In another sign of the lack of fear in the market, Shartsis pointed to the fact that the largest open interest in the
Nasdaq 100 unit trust
options is on the call side. A call is the type of option that gives the purchaser the right but not the obligation to buy a security for a specified price at a certain time and is basically a wager that the stock or index will go up.
The action in options on
has raised the eyebrows of some options market analysts sporadically for weeks now, making many wonder what the heck is going on with the time-share resort firm.
Shares of Fairfield, which is based in Orlando, Fla., were down 6 cents to $10.50.
In a few recent sessions, Fairfield's options prices have caught some analysts' attention. Larry McMillan of
in Morristown, N.J., has had Farifield on the firm's list of high implied volatility options twice in the last few sessions. Implied volatility is the annualized measure of how much the market thinks a stock or index can potentially move. That measure typically rises ahead of a corporate news event.
At times in recent weeks, the Skupp-Seidman options team at
, also has noted the call buying activity in Fairfield options.
Fairfield is slated to report third-quarter earnings on Oct. 31. October equity options expire on Oct. 20.
Trading in Fairfield options was light Monday, with the most trading showing up in the December 12 1/2 calls on the
American Stock Exchange
. About 50 of those contracts trade, leading the price up 5/16 ($31.25) to 13/16 ($81.25).
, the cruise line company, and Fairfield announced that Carnival was going to buy Fairfield, using its stock as the currency.
About a month later, however, the companies called the deal off, because of a dramatic drop in shares of Carnival. In July, the companies announced a marketing alliance.