You've probably heard that MSFT has made an offer to acquire YHOO, and at a nice premium, but it's not a done deal yet (hold off on the BFF tats ;P). I was looking at the call side and the put side and decided to take a gamble with some puts. My thinking from a risk/reward side was the following:
- Calls. YHOO has no real growth story, especially after the earnings they reported. So the price you see right now is MSFT's bid built-in. There's nothing extra to push the stock upward + calls are super expensive now. So if you go calls, then there is limited ROI potential. Again if YHOO had serious growth potential, then different story.
- Puts. The deal doesn't go through, YHOO drops back into misery around the 20 area. The fact that YHOO hasn't already jumped on the offer worries me + puts are super cheap. If any news come out that threatens this deal from going through or it gets called off you have a world of ROI.
MSFT is definitely offering a premium here, so the chances of it going through are high, but the stock growth is limited. Me no likey. The ROI on the put side is not. Me likey. Anyhow, I've been wrong lately, and this is a small investment on my end soooo ... Alright, spin the wheel ...
Buy to Open: 50 puts of YHOO Feb 22.5 at 0.16
--Kevin
0 Comments:
Post a Comment