Oct 152010
 

Investors should buy bullish Yahoo!
Inc. options because the company, which has the second-biggest
U.S. search engine, probably will be sold, Susquehanna
International Group LLP said.

Susquehanna strategists recommended buying a January 2012
$15 call while selling a January 2012 $20 call, a strategy known
as a call spread which cuts the cost of the trade while capping
potential profit. The Sunnyvale, California-based company gained
3 percent to $16.41 as of 10:43 a.m. in New York.

Susquehanna industry analyst Marianne Wolk estimates a 65
percent probability of “a transaction of some kind occurring”
with a valuation of $18 to $20, the Bala Cynwyd, Pennsylvania-
based strategists said in a report. Wolk has a “positive”
rating on the shares. The call spread is pricing in about a 40
percent chance that the shares will climb above $17.50 by the
end of next year, the strategists said.

Yahoo has lost half its value since Microsoft Corp., the
world’s largest software maker, withdrew an almost $50 billion
bid in 2008, and sales haven’t grown under Chief Executive
Officer Carol Bartz, leaving Yahoo vulnerable to fresh
overtures.

To contact the reporter on this story:
Jeff Kearns in New York at
jkearns3@bloomberg.net.

To contact the editor responsible for this story:
Nick Baker at nbaker7@bloomberg.net.

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