Yahoo! Inc. options prices rose
By Jeff Kearns
BN 2/1/2008 16:07: Story JVKW081A74EA

Feb. 1 (Bloomberg) -- Yahoo! Inc. options prices rose as traders bet that Microsoft Corp. may raise its $31-a-share bid for the owner of the most-visited U.S. Web site.

The biggest software maker's unsolicited $44.6 billion offer, which is 62 percent more than Yahoo's closing price yesterday, sent Yahoo shares up 48 percent to $28.38 on the Nasdaq Stock Market, the most in 12 years.

The most-active Yahoo options, April $30 calls, surged 14- fold to $1.70. That means buyers are paying 70 cents more for the right to buy the stock at $30 in the next 11 weeks. July $32.50 calls, the sixth-most active, rose fivefold to $1.15.

"The options are telling you there's a good chance that the bid will be raised to the $32 to $33 range," said Michael McCarty, an options strategist at Meridian Equity Partners Inc. in New York.

Microsoft Chief Executive Officer Steve Ballmer is attempting the biggest-ever technology takeover after failing to compete with Google Inc. in the Internet search services and advertising market, which may almost double to $80 billion by 2010. Microsoft declined the most since April 2006, dropping 6.6 percent to $30.45.

"People out there think the deal could be sweetened," said Adam Futterman, director of options sales and trading at WJB Capital Group in New York. "The market's telling us that this might not be over."

Yahoo, based in Sunnyvale, California, said today that it plans to evaluate the proposal.

--With reporting by Ari Levy in San Francisco and Dina Bass in Seattle. Editor: Chris Nagi

To contact the reporter on this story: Jeff Kearns in New York at +1-212-617-8138 or jkearns3@bloomberg.net.

To contact the editor responsible for this story: Chris Nagi at +1-212-617-2179 or chrisnagi@bloomberg.net.