Putting my money where my Yahoo is?


My post of about an hour ago, “Yahoo’s big day” convinced me I should put more money where my mouth is on Yahoo’s prospects so using the justifications below I just bought about $1000 in Yahoo March 30.00 calls. (in options “bought” is functionally equivalent to “bet”).

My kilobuck effectively gives me the right to sell 2000 shares of Yahoo anytime between now and March 17. For example if Yahoo falls after today it’s likely I’ll lose *all* of my bet. However if Yahoo rises to, say, $35.00 per share by March 16 I could “exersize” the options for a cool $10,000. Unlikely, but I think the market does not incorporate online advertising revenue and profit information very efficiently. In theory this means … opportunity!Today Yahoo fully launches the new ad matching routine, an artistic program formerly known by the name of “Panama”. My understanding is that if they can even come close to Google’s quality matching ads to searches Yahoo will make quite a bit more.

Yahoo’s a much higher traffic site than Google though Google still has the big search share.

Thus my bet is simple here – that people will realize this week that Yahoo has the *potential* for much higher revenues and profit, and his will bump them up 10+% by next week which would put these options in the money.

Options have “time value” which reflects the chance the stock will go up or down in value and they have “intrinsic”value which is the difference between the stock price and the option price. I paid .52 per share in the hopes the stock price will increase soon. Somewhat counter intuitive is the fact that even a modest increase, if it happens this week as I predict, could double my money without the stock ever reaching the strike price.

YHQCF
CALL YAHOO INC MAR 30
Quantity 20 Contracts $1054

Disclaimer: I also have Yahoo Stock. I could have bought about 40 more shares vs betting on these 2000 shares worth of options to rise quickly. But this’ll be more fun to watch for the next month.

Instant Update:
Wh00t Yah00000t! I’m up $120 after 15 minutes. So far this is fun.
Last Trade [tick] 0.58

About JoeDuck

Internet Travel Guy, Father of 2, small town Oregon life. BS Botany from UW Madison Wisconsin, MS Social Sciences from Southern Oregon. Top interests outside of my family's well being are: Internet Technology, Online Travel, Globalization, China, Table Tennis, Real Estate, The Singularity.
This entry was posted in advertising, Google, internet, investments, personal, search, yahoo. Bookmark the permalink.

67 Responses to Putting my money where my Yahoo is?

  1. glenn says:

    Your a maniac but I certainly appreciate your guts laying down a bet like that. I think you could be right…but futures…oh my!!!

    I can’t wait to see Charles Wilson putting up a section on Yahoo! futures on his new website, lol

  2. Gene Breijer says:

    Interesting choice. I ran a chart of Yahoo, and looks like a safe stock bet, and perhaps a decent options choice. As long as it clears $29.50, it should be in good shape. Being a bull, I do hope it does go up as it could lift the market out of this rut. Good luck.

  3. tharwood says:

    I remember we must have been 12 or so and Dr. and Mrs. H. gave you some stock for your birthday. I thought, “Man! I sure am glad I don’t get stock for my birthday!” Now I think, “I wish I had gotten stock for my birthday…” πŸ™‚

    Remember TH’s 4 Golden R00lz for bonus stockmarket play:

    Buy low, sell high. Remember: trickier than it seems.
    Diversification is the next best thing to a free lunch.
      (This is why I don’t invest in much tech)
    Dollar-cost averaging is your friend.

    Those are the classical rules. #4 I learned in 2001:

    When the smart boys all say, “the old rules no longer apply!” begin orderly but prompt re-balancing away from whatever snake oil they’re peddling.

  4. JoeDuck says:

    Gene – thanks. At 29.50 this week I’d probably see at least a 2k gain if I sell the options, though if my options play history is a clue I’ll hang on to gains in hopes of bigger gains and then … break about even.

    Tharwood. Ha, I think it was 100 shares of Pan Am Airlines, so you were right back THEN since I think that stock went worthless.

    Your rulez are excellent EXCEPT that they are not as much short term FUN as watching options rise and fall with the market ebb and flow.
    But at $1054 plus trading fees my ticket to ride may prove …. expensive.

  5. JoeDuck says:

    Yippee – up about $300 … but I say NO DEAL!
    YHQCF.X Ask: 0.70 Up 0.15 Bid:0.65

  6. glenn says:

    Pigs get fat, hogs get slaughtered…

    Set your profit goal and sell it when it hits!

    Your just shy of 30% now!

    πŸ™‚

  7. JoeDuck says:

    Good advice Glenn. Does 1000% count?
    I want a home run here!

    I’m in the money at 30.00 with Yahoo trading at about 29.00 now, so I’ll probably ride this out and hope the price swings up a few bucks by March 17. Exception might be if it swings up dramatically this week.

    If I make $500 I get no decent bragging rights, but turning $1000 to $5,000 would give me a good story to tell.

  8. glenn says:

    Follow consistent approach, next time buy 10k instead of 1k and book 30%, 3k a whack not a bad way to make it!

  9. JoeDuck says:

    Wow, I’m now up over $700. Phew, this is hard work!
    http://finance.yahoo.com/q?s=YHQCF.X

  10. JoeDuck says:

    11:48 am Wed: Ask 1.00, Bid .95 Up about $900. Tempting to double the money and quit after 2 days but I want MORE!
    Last Trade: 0.95
    Trade Time: 11:48AM ET

  11. JoeDuck says:

    Tada, it doubled in two days.
    -YHQCF CALL YAHOO INC MAR 30
    Now $2,300.00, UP 102.65%

    Wow what is the annualized yield on a 2 day gain of 100%? Actually a great example of how rapidly increasing prices can be a misleading indicator of future performance – clearly this won’t go on much longer. Hmmm – what about a “punctual equilibrium” notion of investments, drawing on the evolutionary models that suggest evolution happens in spurts rather than gradually.

  12. glenn says:

    tick, tick, tick…

  13. JoeDuck says:

    Glenn you aren’t helping dude. What if I sell out now and it hits $40 per share? I just can’t handle the pressure!

  14. glenn says:

    LOL…there is no shame in booking profit! It’s only a shame when you know you could but don’t!

    The real lesson here is to play this stuff big! Think about it as if you had 100k invested and then how much would you be looking at? I think you would book profit and not risk 100k like you are risking 1k. If you really want to gamble go to a casino and but the 1k on red or black on the roulette table!

    No matter how much I invest I just think I am investing my last dime – keeps my greed down!

    Even if it does hit 40…buy another option but it might have to be one that you short.

  15. JoeDuck says:

    Thursday Morning and I could take out $2300 on my $1000 “play” for a cool 130% profit. The calls are now in the money a bit with stock trading at 30.11. However even at this new higher price am I still bullish on Yahoo’s short term prospects – ie that Panama launch will focus more attention on the fact Yahoo remain undervalued.

    Yes, so I’m letting it ride. If Yahoo does not continue to rise next week I probably should sell off but …

  16. glenn says:

    I would sell…wait for the next dip…and then double up!

  17. JoeDuck says:

    Glenn I’m giving it some thought. However it would be a LOT more painful at this point to foresake a big gain if it happens than just lose my kilobuck.

    Anyway, it’s fun to watch it hour by hour and keeps me away from productive work. “Sorry honey but NO! I CANNOT watch the kids right now because I HAVE TO WATCH the CALLS!

  18. JoeDuck says:

    Hi Amr –

    Dude, I’m counting on YOU and Jeremy and all the other brilliant Yahoo folks. Don’t go jump to Powerset, OK?

  19. glenn says:

    I love it! This is really great Joe!

  20. JoeDuck says:

    Oh Noooooo – it’s slipping away? Amr! Jeremy! Work HARDER!
    Last Trade: 1.0

  21. tharwood says:

    Buy low, sell high. Don’t feed trolls. Live happily ever after πŸ˜‰

  22. glenn says:

    biting my lip…

  23. JoeDuck says:

    Last trade at .98

    It’s, it’s s-l-i-p-p-ing away?

    Glenn. I’m hanging on baby, I’m hanging on !

    “Honey, about that fancy Valentine’s Day Dinner. How about we eat in this year?

  24. JoeDuck says:

    Hey, they are up slightly at $1.00 on the close today Friday.

    Time value could eat away a bit at this over the weekend, but with Yahoo at 29.74 I’m OK holding on in the hopes of $32+ by expiration which would be a gain of $3000+

    Hey, it could happen!

  25. Paul says:

    I could tell you a few horror stories about options, but I think I’ll wait and see how this little gambit of your plays out first. πŸ˜›

  26. glenn says:

    The option game…one thing I learned…

    Get in, get out, get in, get out

    Joe we are all hoping you hit a homerun maybe then you can take us all out to dinner!

  27. glenn says:

    BTW Joe my prediction for an unbelievable ride will be Intel starting the second half of this year! They are going to go very strong. Watch that space.

  28. JoeDuck says:

    Glenn if I hit a homerun I’m definitely good for dinner! If not prepare for Pizza and a six-pack o’ Bud.

    Intel – sounds interesting!

  29. glenn says:

    Rumor has it Intel is delivering their new 45nm chips 6 months early – if that is true – it is truly momentus and AMD is really going to take a hit this year – even the ATI acquisition isn’t going to bail them out.

    To deliver 45nm that far ahead of schedule mean they already have them now. It will most definitely set a new performace/watt ratio. Really impressive to see the megalith get the wheels moving again – the competition means we will be the winners in the end. Look for computing to really make some big leaps in the next 18 months!

  30. JoeDuck says:

    Nooooooooo! It’s slipping away!
    Gritting teeth and holding on for a Yahoo! moment next month.

    Last Trade: 0.75
    Trade Time: 11:50AM ET
    Change: Down 0.25 (25.00%)

    The context ad changes are significant enough that this is a case where insiders *really* should know a lot about future prospects within a few weeks and this info should make it’s way into the price quickly. Downturn not a good sign here as I’d assume it’s something of an indication that Panama is not exceeding expectations, but the game is still early!

  31. glenn says:

    as predicted see post (16)…there is always a dip πŸ™‚

    You bought in at the right time…you should have sold and then purchased another long contract today. πŸ™‚

    Just my two cents!

  32. JoeDuck says:

    Hey, up to .85! Zip a dee Yahoo dah, Zip a dee Yahoo day.
    Last Trade: 0.85
    Trade Time: 12:42PM ET
    Change: Up 0.15 (21.43%)

    Glenn I see what you are saying but with a small stake like this, and options which are more to trade than stocks (at Fidelity), I’ve got $39 fees in and out plus the Bid Ask spread to deal with, so frequent trading could really eat me up on this small bet. Also, I really was expecting a bigger surge in price so I didn’t want to leave that on the table.

    I’m now pretty much seeing this as a bet Yahoo will head above 30 by next month and I’ll “win” [(March 17 price – $30) x 2000] – $1034 – fees.

  33. JoeDuck says:

    As high as 1.45 this fine Wed morning, now at 1.30,
    but I’z holdin’ on, I’z holdin’ on!

    Last [Tick] 1.30[ + ]
    Change Up0.45
    % Change Up52.94%

  34. glenn says:

    (33) Joe when you are ready we will buy ourselves a trading seat and fly to NY to trade realtime for a day…now that is fun!

  35. JoeDuck says:

    Glenn – Ha – I think you’ll need to chip in … disproportionately.

    Unless of course Yahoo pulls a Google here. At Yahoo $530 I’d be up a cool one million on my $1000 bet.

  36. glenn says:

    giddy up!

  37. JoeDuck says:

    W00t Yah00t it’s a new high point!
    Last Trade: 1.51
    Trade Time: 3:17PM ET

  38. JoeDuck says:

    YeehawYahoo – .52 to 1.75 in 10 days.
    Last Trade: 1.75
    Trade Time: 1:16PM ET

    Wait, make that 1.90!
    Last Trade: 1.90
    Trade Time: 1:23PM ET

    So, will Yahoo dip back down before 17th of next month? Sure it could, but I think I’m in for the duration here. Time value in options is always positive. Intrinsic value is currently at about $1.40? [not sure, misquoted this earlier] so unless I think Yahoo’s prospects will dim why sell? I think the stock is still very undervalued, so I’m hanging on.

  39. glenn says:

    Go for it…when you said last trade 1:23PM, I almost fell off my chair – I can’t believe where today went!

  40. JoeDuck says:

    Henry! Great thinking, so why can’t you be back in the stock analysm biz when I need ya?

    http://www.internetoutsider.com/2007/02/yahoo_crawls_ba.html

  41. JoeDuck says:

    Last Trade: 2.19
    Trade Time: 11:33AM ET
    Change: 0.39 (21.67%)

    With Yahoo at 31.76 this means the options are:
    Intrinsic Value = 1.76
    Time value = .43
    Total Value = 2.19

    It seems that as long as I’m bullish on Yahoo I should hold on. Time value will go down but that is no longer where the value is in the options.

  42. JoeDuck says:

    Tuesday 20th:
    Last Trade: 1.90
    Trade Time: 10:07AM ET

    Stock trading at 31.48

    Intrinsic value 1.48
    Time Value .42
    Total Value 1.90

  43. JoeDuck says:

    Last Trade: 2.20
    Trade Time: 11:02AM ET

    Stock at 31.78

    Intrinsic Value 1.78
    Time Value .42
    Total Value 2.20

    Cool, the time value is the same even as intrinsic value increased by over 15%. I think this is comfortably consistent with options price theory?

  44. Paul says:

    Joe- Consider taking some of your chips off the table and don’t get greedy. You also say you own the underlying common, so even if you bag your profit now, or take some of it off the table, you’ll still win on the common (though proportionaly not as much). Remember, in bull markets, bulls make money; in bear markets, bears make money; pigs just get slaughtered.

    Of course Murphy’s law dictates that if you do that (sell half your contracts), the common will pop to 38. πŸ˜›

    Disclaimer/Disclosure: I am a professional and I am not a big fan of options, so I do have a pronounced bias. I don’t own Yahoo (or Google), but do own E-Bay (at 28).

  45. JoeDuck says:

    Paul and ….

    I think good advice to diversify the position. I had not really thought of the fact my Yahoo actual stock means I’m more “exposed” than I’ve been thinking.

    Ha – check out Glenn’s above “hogs get slaughtered”.

    But wait, it’s down to $2 today at the close. I’m up almost 3k on the options now but I’ve GOT to hold on for MORE profit!

    OINK! ?

  46. JoeDuck says:

    Hey – wisdom of crowds experiment time? If I get enough feedback here I’m thinking maybe I should do what the crowd suggests from these 3 options next week.

    Sell all
    Hold all
    Sell half

  47. glenn says:

    hears the steady staccato of fingers drumming on a desk!

  48. Tommo says:

    “Dollar cost averaging is your friend.”

    So I’d inline to selling half, since it also works in reverse, if you have the stomach for hindsight.

    Best advice I ever got was to sell and walk away without looking back.

  49. Paul says:

    Concur that not looking back is critical to success.

  50. JoeDuck says:

    Hey, up near the high so far:

    Last Trade: 2.30
    Trade Time: 12:35PM ET
    Change: Up 0.40 (21.05%)

  51. JoeDuck says:

    Feb 27:
    OH NO! It’s melting down with the big market:
    Last Trade: 1.40
    Trade Time: 2:01PM ET

    But, still up almost 200% …

  52. glenn says:

    Recession news never helps!

  53. JoeDuck says:

    It’s slipping away …. again!

    Last Trade: 0.85
    Trade Time: 3:55PM ET

    10 days to go and I’m about back where I was a few days in – up about 60% = $600

  54. JoeDuck says:

    Yipee, back up today! If I wind up doubling my 1000 I’ll call this a “success”. I’m not taking the chips off the table yet though.

    Last Trade: 1.10
    Trade Time: 12:49PM ET

  55. JoeDuck says:

    OUCH! There goes the neighborhood!?

    Last Trade: 0.20
    Trade Time: 12:14PM ET
    Change: Down 0.85 (80.95%)

    http://www.forbes.com/2007/03/09/yahoo-att-pact-markets-equity-cx_er_0309markets14.html?partner=yahootix

  56. Tommo says:

    Now that’s what I call volatile!

    Well, buy low, sell high. Not much to lose waiting to see if it recovers, eh?

  57. JoeDuck says:

    Not much to lose indeed. But, there’s still a glimmer of hope over the next week, and I’d have to say it was a fun game overall. However, if I want to retire early I really should stick to fixing toilets at the rental houses.

  58. JoeDuck says:

    Ha!

    After a month of triumph and tragedy, of tears, and fears, and a couple of cold beers….. I’m very close to where this all started with only a few days to go.

    C’mon Yahoo – make me proud and go up to $33, if only for a few minutes so I can sell off and claim the bragging rights I … deserve?

    Last Trade: 0.45
    Trade Time: 2:07PM ET
    Change: Up 0.20 (80.00%)

    Prev Close: 0.25
    Open: 0.25
    Bid: 0.40
    Ask: 0.50

    Day’s Range: 0.25 – 0.50
    Contract Range: N/A – N/A
    Volume: 25,609
    Open Interest: 70,775
    Strike: 30.00
    Expire Date: 16-Mar-07

  59. JoeDuck says:

    Interesting – at 30.00 per share time value is .45 (intrinsic value = 0). Time value is thus very close to what it has been all along. The time value will decay very fast at the end of the cycle, but that’s almost here so I’m surprised it remains so high.

  60. JoeDuck says:

    Ha – what a difference a few hours makes. I was preparing to just write this off as a total loss, but it’s back up to .30 with … two days to go baby!

    But wait, didn’t I have a 4500 profit just a few weeks ago?
    I blame Global Warming for this!

    Last Trade: 0.30
    Trade Time: 2:37PM ET
    Change: Up 0.05 (20.00%)
    Prev Close: 0.25

    Day’s Range: 0.10 – 0.35

  61. JoeDuck says:

    2 minutes to go and I’m … underwater. I just put in a market order but don’t expect any bids since Yahoo has been trading below 30.00 so the options will expire….worthless.

    Hey, but it was FUN! ?

  62. glenn says:

    Sorry to hear that Joe!

  63. peterecjq says:

    Keep working!

  64. JoeDuck says:

    After yesterday’s earnings report I’d summarize this episode by saying I was not simply timed wrong, but wrong about how Panama PPC would help Yahoo.

    The early reports about Panama’s success seem to have been greatly exaggerated, and it’s probably time for Terry Semel to hang up his hat and leave Yahoo to more tech minded folks.

    Ironically, it’s Google, with legions of tech PhDs, that has created and promoted the “fun and user friendly” environments while Yahoo’s more “entertainment centric” focus has created more complicated navigation, search, and advertiser systems.

  65. Pingback: Microsoft may buy Yahoo = a good idea. « Joe Duck

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