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September 25, 2012  Tue 3:47 AM CT

YHOO: SEE CHART GET CHAIN FIND STRATEGIES
Yahoo investors are looking from some good news from CEO Marissa Mayer today.

The 37-year-old transplant from arch-rival Google is expected to announce steps that will improve the company's standing in search and advertising. Those are two areas where the once-mighty Internet giant has steadily lost market share, while its younger rival has continued to grow.

Option traders are betting on a rally in the near term, with more than 22,000 Weekly 16 calls purchased against previous open interest of just 889 contracts. Most of the contracts priced for $0.06 to $0.11, with momentum accelerating throughout the afternoon as YHOO pushed higher.

The stock ended the session at $16, up 1.68 percent. Those short-term calls are looking for a big rally before the close of trading on Friday afternoon and are designed for situations like the one Yahoo now faces. These options are popular because they're cheap and can provide exposure to a specific news event on a very limited time frame.

Yahoo is at a critical juncture, with analysts predicting that it will continue to lose advertising business to Google and Microsoft based on current trends. The stock has fluctuated listlessly in a range ever since the dot-com bubble broke in 2000, while GOOG closed yesterday at a new all-time high.

Investors also sold the January 14 puts on YHOO for $0.30 to $0.34 and bought the October 16 calls for $0.26 to $0.31, but volume was below open interest in both. Overall option volume was almost triple the daily average, according to our data systems.
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