Dan Nathan's Yahoo! Inc. Trade

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Dan Nathan
talked on CNBC's Options Action
about a bullish options strategy in
Yahoo! Inc.YHOO
. He said that people are asking him all day how to take a long position in the stock because they see it as a play on
Alibaba Group Holding LtdBABA
. Nathan thinks that it is better to buy
Yahoo! Inc.
than
Alibaba Group Holding Ltd
, because it is trading below its core value. To take a long position he would buy a call butterfly with November expiration. Specifically, he would buy the November 40 call for $3.20, sell two November 45 calls for a total of $2.70 and buy the November 50 call for $0.50. This trading set up would cost him $1 and it would be profitable if the stock trades between $41 and $49 on November expiration. Maximal profit of $4 would be achieved if
Yahoo! Inc.
trades at $45 on November expiration. Mike Khouw added that he likes the 4 to 1 ratio and the fact that the stock doesn't have to move a lot to pay off because the structure is slightly in the money.
Posted In: CNBCMediaDan NathanMike KhouwOptions Action
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