Yahoo! (NASDAQ: YHOO) bear call spread

Scared of the Facebook boogie man? Yahoo! Inc. (NASDAQ: YHOO) may be under pressure as chatter increases around Facebook offering a full-blown new email service that could steal usage and ad revenue.

Yahoo’s! stock has been trying to recover ever since the refusal of a Microsoft (NASDAQ: MSFT) buyout bid some time ago. This moderately bearish trade offers traders a chance to take a bearish stance, while dramatically reducing their risk when compared to shorting YHOO stock.

YHOO Credit Spread Trade Details:

YHOO is currently trading at $15.02, up roughly 0.30% today.

Credit Spread/Bear Call Spread–

• Sell the March 16 call (out-of-the-money)
• Buy the March 18 call (out-of-the-money)
• Net credit of $0.24 per spread

By opening a free virtual trading account with OptionsHouse, you can build a profit/loss diagram to help visualize the risk/reward dynamics of this trade.

Profit/Loss Details:

Maximum Profit: $0.24 (the credit collected). This excludes commissions, though exit commissions will not be required if both calls expire worthless.

Maximum Risk: $1.76 (the difference between strikes minus the credit collected). Reward on risk is approximately 13.6% in 39 days.

Breakeven: $16.24 (the strike of the lower call plus the premium collected).

For more on YHOO:

Online ad improvement seen in IAC’s 4Q loss

Option strategies in Yahoo! (NASDAQ: YHOO)

Yahoo! (YHOO) Sees Longer-Term Put Selling

Remember, trading Ideas are generated by the ONN Idea Generating Platform as a starting point for people to begin their own research. Trading ideas are not intended as trading or investment advice or recommendations that any particular security or strategy may be suitable for any specific person. You are solely responsible for your investment decisions, but we hope that some of these ideas will give you a starting point as you look for strategies to employ.

Keep an eye on the “Trading Idea” section of www.ONN.tv for more ideas from nine different option trading strategies, courtesy of the ONN Idea Generating Platform.