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Here Is A Buywrite Strategy for the Upcoming Yahoo! Inc (YHOO) And Verizon Communications Inc. (VZ) Deal

The rumors are out this morning that Verizon Communications Inc. (NYSE:VZ) is close to an agreement to buy Yahoo! Inc. (NASDAQ:YHOO). One intriguing way to play this possibility is with a long-dated Yahoo buy-write.

Long-dated buy-writes, typically involving buying shares and selling call options with a year or more to expiration, can be effective ways to speculate on takeovers. When deals are made for cash, virtually all the time value of the option disappears, since options are about volatility and cash, by definition, has none. Thus, depending on the terms of the deal, it’s actually possible to make money on both the long-stock and...


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