Trade Update $YHOO Closing Call Calendar For Gain, Left Plenty on the Table

TradeUpdateDec12th,2012?

Talkaboutmessingwithaperfectlygoodtradebytryingtogetalittlecute?

InlateSeptwhenYHOOwasseeminglyleftfordead(stockaround$16)IboughtsomeJanupsidecallswiththethoughtthatthesumofthepartswasbeingundervaluedinfrontofaperiodthatcouldseeafewcatalyststhatcouldwakethestreetupabit?

Tobehonestitdidnteventakeanycatalyststowakeinvestorsup,asthemarketrallybroadenedout,investorswereclearlylookingforopportunitiestobuylaggards(seeRIMM,DELL,CSCO)?

WithYHOOnowwellthroughmylongandshortstrikesoftheJan17。

50/Dec18CallSpreadthatIleggedintofor。

17,thespreadbarelyhasadelta,andIseelittlereasontocontinuetoholdit?

TheonlythingnowIcandoisnotbetoopissedthatIoutsmartedmyselfbyturningthelongcallsintoadiagonalcalendar,thuscappinggains,butwaitforanopportunitytogetbackinonthelongsideonapullback。

Action:SoldtoCloseYHOO($19。

36)?

Jan17。

50/Dec18CallSpreadat。

52fora。

35gain

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TradeUpdateNov5th,2012?

YHOOisupabout7%sincemyJancallpurchase(below)inlateSept,andjustnowmakingnew52weekhighs?

Onaneartermbasis,thestocklooksatadextendedtomeandIwanttoreducemycostbasisbysellingahigherstrikecall?

against?

theonethatIown,andthuslowermybreak-even,reducingmyrisk,butalsocappingmygains。

TheslighttwistonthistradefromanormalcallspreadisthatIamsellinganearerdatedexpiration,whichgivesmeachancetocollectpremiumintheneartermwithachancetoputonanevencheaperstructureafterDecexpiration。

Action:SoldtoOpenYHOO($17。

24)Dec18Callat。

22

NewPosition:LongYHOO($17。

24)Jan201317。

50/Dec18CallSpreadfor。

17

NewBreak-EvenonDec2012Expiration?

IfYHOOisbelow$18onDecExpirationtheDec18callsthatIamshortwillexpireworthless,andIwillessentiallyowntheJan201317。

5callsfor。

17,IwillthenlooktosellahigherstrikeCallagainsttheJanstomakeanewverticalspreadfurtherreducingmycostbasis。

Whilethislookslikealottopayfora。

50widecallspread,youhavetorememberthatthisisadiagonalcalendarspread,myhopeisthatthestockmovesalittlehigherbutbelow18。

Also,thetheDecembercallswilldecayatafasterratethantheJans,soevenifthestockgoessidewaysthiswillmorethancoverJandecay。

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OriginalPostSept。

27th,2012?

NewTradeYHOO?

SumofthePartsfromGSandActivistSaysStockTooCheap;WethinkVoltooCheap

IamintheprocessofhavingalittleTwitterConversationwithEricJacksonofIronFireCapital,heisasmartguy,whohasbeenanactivistinvolvedinYHOOforyears?

HealertedmetothefactthatGoldmanSachsre-initiated?

YHOOwithaBuyanda12monthpricetargetof$22。

FromGSanalystHeathTerrysnotetoclientsthisam:

Yahoohas?

beenaddedtotheBuylistwitha12-month,$22pricetarget。

Webelievethe?

valueofYahoo’sbalancesheetassetsandthecorebusinessareworthmore?

thanthecurrentstockpriceandthatcapitalallocationactionsoverthe?

comingmonthswillserveasthecatalysttodrivethatrevaluation。

Whilewe?

havelongbeenmorenegativeonYahoo’sprospects,theuncertaintyofthe?

Alibabastake’svaluehasbeenreduced,thecompanyhasanewCEO,and?

theYahooJapanstakehasappreciatedby30%sinceMay21,creatinga?

muchmoreattractiverisk/rewardscenario。

Catalyst?

“Some”oftheParts。

With$5。

80/shareincash,$4。

00/shareinYahoo?

Japan(aftertax),and$5。

00/shareremaininginAlibabaownership,Yahoo?

coreandthe$0。

83inGAAPEPSweexpectin2013,represents$1。

30/share?

Thereturnof85%oftheinitialmonetization,$3。

00/share?

shouldserveasacatalystforshareholderstorealizethevalueoftheparts。

Valuation?

Our$22targetonYHOOvaluesthebalancesheetassetsat$10。

6bnor?

$14。

79/share?

andYahooat$7。

17/shareor6X2013EEV/EBITDA?

inlinewithotherex-orslowergrowthcompanieslikeAOL(5。

0X),WebMD?

(8。

2X),Orbitz(4。

2X),comScore(11。

2X),andExpedia(9。

0X)。

MYVIEW?

WhilethisisnotanameIhavegivenalotofthoughtoflate,EricsthoughtisthatmostPMshavenoteither。

earlierthismorningthough,someonebought10koftheNov17/18CallSpreadsfor。

12,greatriskreward?

OntheVolfront,astherealizedvolatilityofYHOOhasmovedlower,3monthimpliedvolatilityisnownear2yearlows。

Hereisthechartthattellsthestory:

ThemarketispricinginaNoCatalystenvironmentfromnowuntilJan13expiry。

Whilethemarketmayberight,therisk/rewardisveryfavorable,withtheupsideobviouslyskewedtohighervolatilitybetweennowandJan13。

MYTRADE:YHOO($16。

07)BoughttheJan1317。

50callsfor。

39

Break-EvenonJan13:

Profitsabove17。

89,lossesofupto。

39btwn17。

50and17。

89withmaxlossof。

39?

below17。

50。

IWILLLOOKTOSPREADTHESEIFANDWHENTHESTOCKMOVESHIGHER。


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