MARISSA MAYER TRADES: BULL PUT TRADE VS. LONG CALL TRADE 

Marissa Mayer caused a controversy in February this year when she changed Yahoo’s policy of allowing its employees to work from home.  While it likely caused much consternation for employees who telecommuted, it was hailed by some (including Mayor Bloomberg) as a good move.  In making the change, Mayer cited the need for more communication and collaboration in the office.  While some employees may have griped about this change, they would certainly have supported the other changes she made, which included free food, new iphones, android phones, etc, and her recent doubling of paid maternity leave and 8 weeks of paternity leave for dads.   In my previous post on Marissa Mayer’s telecommuting decision, I noted that Jim Cramer (of TheStreet.com) supported Marissa Mayer and considered YHOO stock inexpensive.  In that post, I suggested two possible trades for traders who considered YHOO might indeed be a ‘turnaround’ candidate.  Since April options have expired, let’s examine how those trades would have turned out.

PLAYING THE YAHOO TURNAROUND

Since my March 4^th 2013 blog post, YHOO has trended higher, albeit with a couple of pull-backs (see chart below).

Marissa Mayer leads YHOO higher

Trade #1: The aggressive trader who bought some OTM calls

YHOO does not cross $25 by April options expiration

Unfortunately, since YHOO never rose above 25 before April options expiration, if one waited until April options expiration, the OTM calls would have expired worthless.  However, if one used a GTC order to sell some or all the calls (see prior post on The Power of the GTC order), one may have made a respectable profit (up to 85% on 4/12/13).  This trade suggests that sometimes the best course of action is not to wait for the ‘home runs’, but generate smaller but more consistent profits.

YHOO Long call trade details

Trade #2: The less aggressive trader who opened the Bull Put Spread (Put Credit Spread)

Bull Put Spread wins over Long Call

The less aggressive trader who had a bullish outlook on YHOO, and opened a Put Credit spread was able to keep the entire credit as YHOO closed above $22 on April options expiration Friday.  This trade exemplifies the benefits of a bull put spread best – an option trade can be profitable even if the stock does not rise as one expects it to.

Please note that the above trade examples were not recommendations and readers are responsible for their own trading decisions (see fine print disclaimer). I merely used the option trades to demonstrate how one might use current news items to generate profitable trades.

Be sure to have a plan before one enters the trade (see How to Trade Stock Options Online).

Happy Trading!