An unusual three-way trade is positioning for a potential drop in Yahoo, which has been trapped in an increasingly tight range for the last nine months.
YHOO trades at $14.99, down 1.64 percent on the day. The Internet stock has been trading mostly between $14.50 and $16.50 since September.
A trader bought 16,800 October 12 puts for the ask price of $0.40 while selling 8,400 each of the October 14 and 15 calls for $1.91 and $1.35 respectively. The volume at the October 15 strike was less than open interest, but all the transactions appear to be opening new positions.
The overall trade has a very bearish bias, especially with the short calls that are in the money. This could very well be a collar against long shares.
Some traders sell in-the-money calls with the intention of getting assigned and selling their stock, collecting the premium from higher volatility in the process. (See our Education section)
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