Breaking News: Yahoo Jumps on Microsoft Comments

Like Ike and Tina Turner, Microsoft (MSFT, $22.72, up $0.06) and Yahoo (YHOO, $13.39, up $1.64) can’t seem to stay away from each other. It seems Microsoft’s CEO, Steve Ballmer was quoted as saying a Microsoft acquisition of Yahoo would still “make sense economically.”

I’ll bring you more on the story later but it’s great news for the Yahoo options. The October 12.50 calls (YHQJV, $1.10, up $0.75) are well up over 200% on the news…but I didn’t recommend that one.

Over the weekend, I mentioned how Yahoo not taking the original $30+ deal could haunt shareholders forever. It’s clear what Microsoft’s new plan of attack is. They are trying to take advantage of Yahoo’s cheap share price and the turmoil in the market. I can’t say I blame Microsoft. As a matter of fact, like a Guinness beer commercial, it’s brilliant!

The January 17.50 calls (YHQAW, $1.40, up $0.40) are up 40% on the news but only slightly from where they were profiled. I doubt anything serious will come from this in the next day or two because I don’t think Ballmer would have said anything if that were the case. But it does mean that Yahoo is still on his mind despite saying it’s over. Although it has been confirmed there have been no “new” negotiations, Microsoft still wants Yahoo.

What’s love got to do with it? It’s business baby.

Rick Rouse
Rick@OptionsMentoring.com

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