Last Year, Yahoo (YHOO) overhauled it’s online advertising sales to more closely mimic the model set by its competitor Google (GOOF). Yahoo called the project ‘Pamana’ to in some way compare it to the colossal undertaking of trenching a canal to join two bodies of water. The power of the metaphor is somewhat questionable, but the business idea, at least on the surface, was somewhat sound.
Audio Podcast:
An audio podcast of this article is available at: poweropt.com/podcasts/2007_04_16_YHOO.mp3
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The basic concept of ‘Panama’ was to provide priority placement in search results to advertisers who paid a premium. In their site’s words, “Yahoo! Sponsored Search is a form of search engine marketing that lets you create ads that appear in search results on the Web’s most popular destination and other sites in the Yahoo! distribution network, so you can attract people who are already searching for what you sell.” An advertiser can do this by submitting a bid for placement on a certain keyword search, or through a daily budgeted amount.
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Tomorrow, Yahoo will release its first set of earnings reports since the revamp of its ad system and investors will be keen to find out how things are going. Although the company has said it doesn’t expect to see an earnings increase from the ‘Panama’ improvement until the second quarter.
This article assumes Yahoo will do well on its Tuesday earnings because of the ‘Panama’ revamp. This might not be the case. This is just to show you, the investor, how PowerOptions will allow you to make more informed decisions (and potentially more profitable decisions) about trading positions you develop. An investor can also get assistance from PowerOptions‘ live support staff and online support tools to learn when to effectively use an option strategy.
If your view of a stock is bullish, you might choose to use bull call debit spreads or bull-put credit spreads to make money off the hunch. If you believe a stock will fall, you might choose bear put debit spreads or bear-call credit spreads. Today we will stick to the covered call investment strategy. Click on any of the above links for more information about the specific strategy or take a look at our covered call example.
Related to ‘Panama,’ Yahoo recently signed an exclusive agreement with media giant Viacom to provide sponsored search and contextual ads for Viacom’s 33 broadband sites.
The sites include the heavy hitting MTV.com, VH1.com, Nickelodeon.com, Comedy Central and BET.com. Currently Yahoo is only doing contextual text ads for the sites. But they’re not ruling out expanding their relationship to include an additional 140 Viacom Web sites with other advertising formats such as banner ads.
Potential Trades:
Below we take a look at Yahoo and a few companies in the Internet Software and Services sector. This broad view may help an investor identify other compelling trades in the sector. All of the following option trades have 36 days until expiration. These trades were discovered using the powerful suite of option search tools found at PowerOptions.
| PowerOptions covered call search Internet Software and Services Sector (36 days) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Sym |
Stock Price |
OPTION | Strike Info |
Opt Bid |
% Dnsd. Prot. |
% If Unch. |
% If Asgnd |
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| YHOO | $31.41 | YHQEZ | 07 MAY $32.50 | $0.90 | 2.90% | 2.90% | 6.50% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| GMKT | $15.90 | QMFEW | 07 MAY $17.50 | $0.60 | 3.80% | 3.90% | 14.40% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| AMZN | $42.41 | ZQNEV | 07 MAY $42.50 | $2.05 | 4.80% | 5.10% | 5.30% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PCLN | $55.57 | PUZEK | 07 MAY $55.00 | $2.90 | 5.20% | 4.40% | 4.40% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
YHOO – Yahoo! This trade involves the May $32.50 call option and offers 2.9% downside protection and 6.5% potential profit if the stock is above the $32.50 strike price at the end of the option period. The stock is currently trading at $31.41.
GMKT – Gmarket, Inc. operates a retail e-commerce marketplace in Korea. This trade involves the May $17.50 call option and offers 3.8% downside protection and 14.4% potential profit if the stock is above the $17.50 strike price at the end of the option period. The stock is currently trading at $15.90.
AMZN – Amazon.com. This trade involves the May $42.50 call option and offers 4.8% downside protection and 5.3% potential profit if the stock is above the $42.50 strike price at the end of the option period. The stock is currently trading at $42.41.
PCLN -Priceline.com. This trade involves the May $55.00 call option and offers 5.2% downside protection and 4.4% potential profit if the stock is above the $55.00 strike price at the end of the option period. The stock is currently trading at $55.57.
Competitors:
Competitors for YHOO include: Google Inc. (GOOG), AOL LLC (private), MSN (private), Healtheon/WebMD Corp. (HLTH), Infospace Inc. (INSP), VA Software Corp. (LNUX), Marchex Inc. (MCHX), Napster Inc. (NAPS), Rediff.com India Ltd. (REDF), Sina Corp. (SINA), and Travelzoo Inc. (TZOO).
Competitors for GMKT include: Yahoo! Inc. (YHOO), Daum Communications Corp. (private), and GS Home Shopping Inc. (private).
Competitors for AMZN include: Barnes & Noble Inc. (BKS), eBay Inc. (EBAY), Columbia House Company (private), Borders Group Inc. (BGP), Gamestop Corp. (GME), GSI Commerce Inc. (GSIC), VA Software Corp. (LNUX), PC Mall Inc. (MALL), Movie Gallery Inc. (MOVI), and Overstock.com Inc. (OSTK).
Competitors for PCLN include: Expedia Inc. (EXPE), Orbitz, LLC (private), Travelocity.com L.P. (private), and SABRE Group Hldgs. Inc. (TSG).
For more information about how to identify and research great option trades, visit the PowerOptions website. There you will find the data you need to make quick, clear, and informed decisions. You can trade knowing you have found the best investment. Also, PowerOptions will allow you, with a few quick clicks, to quickly and accurately compare trades. PowerOptions‘ premium customer support is second to none in the industry. They can be easily contacted when you need them at their toll-free number to answer customer questions. Call them now toll free at 877-992-7971.
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[tags] Viacom, MTV.com, VH1.com, Nickelodeon.com, Comedy Central, BET.com, AOL LLC, MSN, Daum Communications Corp., GS Home Shopping Inc., Columbia House Company, Orbitz, LLC, Travelocity.com L.P., BGP, Borders Group Inc., BKS, Barnes & Noble Inc., EBAY, eBay Inc., EXPE, Expedia Inc., GME, Gamestop Corp., GOOG, Google Inc., GSIC, GSI Commerce Inc., HLTH, Healtheon/WebMD Corp., INSP, Infospace Inc., LNUX, VA Software Corp., MALL, PC Mall Inc., MCHX, Marchex Inc., MOVI, Movie Gallery Inc., NAPS, Napster Inc., OSTK, Overstock.com Inc., REDF, Rediff.com India Ltd., SINA, Sina Corp., TZOO, Travelzoo Inc., YHOO, Yahoo Inc., bear put debit spreads, bear-call credit spreads, bull call debit spreads, bull-put credit spreads, covered call example, covered call investment strategy, investment strategy, iron condor, poweroptions, stock option trading, stock options [/tags]