Selling Weekly Put Options in Yahoo (YHOO)
Each Friday I look to sell weekly options set to expire the following Friday to take advantage of the rapid time-value decay (theta) of the weeklys heading into the weekend. Weekly options incur the greatest time value loss on the Friday before the weekend and on expiration Friday. Options market makers tend to adjust pricing throughout the 1st Friday afternoon to account for the weekend time-value loss, so I look to initiate new positions around noon.
This week my MarketClub screens identify Yahoo (YHOO) as a strong weekly options put sale candidate. YHOO has long been rumored as an M&A target with the most logical suitor being Microsoft (MSFT). Headlines surfaced again this week that MSFT could be interested in a wholesale take-out of YHOO pushing near-term implied volatility levels to 52-week highs.
While clearly not as potentially profitable as purchasing call options or shares outright in the case YHOO is taken over, I prefer selling puts here to take advantage of the elevated volatility mainly because we’ve been down this road (MSFT-for-YHOO) countless times over the last 3-5 years with no resolution. While I do feel an acquisition of the company is likely at some point in the future, I’m not ready to bet the farm that it happens anytime soon. So in the meantime, I’ll continue to sell downside weekly put options, collecting premium every week and in the event I’m assigned on the puts I’ll just transition into being long stock until YHOO is eventually acquired.
PAS-MC Weekly Options Portfolio Position:
Sold YHOO 15 puts at $0.33 (72-vol and $0.04/theta) – Stock around $15.64
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Mr. Saunders serves as Mesa’s Vice President of Marketing, bringing with him a wealth of experience in strategic marketing and operations. In this role, Mr. Saunders is responsible for overseeing all marketing activities, utilizing a blend of traditional and digital strategies to enhance brand presence and profitability, managing a multi-million dollar marketing budget across various media platforms, and leading the continued implementation of CRM systems to streamline customer engagement and drive business growth.
