Earnings Play: Buy Puts on Yahoo

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You’ve heard the news about Yahoo (YHOO).

Yahoo’s new broom, Carol Bartz, needs to show she’s turning the company around, so a big chunk of layoffs were announced last week. Also, cleverly coincidently with next Tuesday’s earnings announcement, comes news that Yahoo will shed its HotJobs unit.

There’s more than a little smoke in all this — an air of desperation and distraction, which I ain’t buying.

But lots of folks are. The whisper number for next Tuesday’s announcement is 10 cents. The Street’s expectation is 9 cents — which is even with last year’s average. In the options pits, there’s a lovefest going on, with bullish call activity hitting highs for the year.

Even the shorts give Bartz a deferential nod.

Yahoo’s business model still depends upon display advertising. And advertisers who need to cut, cut Yahoo before they cut Google (GOOG).

Even after Bartz has trimmed and tucked, this core issue is still unaddressed. Yes, there are talks going on again between Microsoft’s (MSFT) Steve Ballmer and Bartz on the search side, but nothing there is likely to stop Googzilla.

Yahoo’s earnings will be a wake, not a party. So, buy the Yahoo May 16 Puts (YHQQQ) up to $2.60. Place your trade now for a double.

Don’t sit back and let profits slip through your fingers this earnings season. You can get specific recommendations from Chris Johnson, complete with buy and sell instructions, by signing up for Winning Edge today.


Chris Johnson is the co-editor of The Winning Edge trading service designed to help you make options profits around corporate earnings and other market events. For more information about Chris, read his bio here.


Article printed from InvestorPlace Media, https://investorplace.com/2009/04/buy-puts-on-yahoo/.

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