Option Investor

Option Writer Portfolio - May

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YHOO - Yahoo! Inc. (Yahoo!), incorporated in 1995, is a global Internet brand.The Company’s offerings to users fall into five categories: Front Doors; Search; Communications and Communities; Media, and Connected Life. The majority of its offerings are available in more than 20 languages. Yahoo! generates revenues by providing marketing services to advertisers across a majority of Yahoo! Properties and Affiliate sites. The compnay is currently being looked at by AOL and MSFT. The earnings are due on April 22nd. So that means there is more risk premium built up in the May options. That's why we are selling the May 22.5 strike for now.

Selling the 22.5 put strike yields an approximate 22% max return on the initial margin requirement. Those more aggressive players could sell the 25s for around $0.86 per contract. Also, the max margin players (I'm going to come up with some clever name for you all) could sell 12 - 14 contracts and still have some room for the margin requirement to adjust.

The next line of support is at 25.72 followed by 24.57 and finallly 22.37. The 200 day moving average is around 26. So the 25.72 will be our technical support.

Risk Management for YHOO
Strike Stop = $ 22.50
Cost Basis Stop = $ 22.01
Technical Stop = $ 25.72
Premium Stop = $ 25.38

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