"Just because somebody is a good leader of a division inside one of the best companies in the world, which is Google, does not mean that it's going—they're going to be able to be a good CEO of Yahoo," said Niles on "Closing Bell," referring to Mayer, who was a longtime executive at Google before taking the helm at Yahoo in July 2012.
Earlier this month, Mayer faced criticism for her decision to fire Chief Operating Officer Henrique de Castro, a former Google colleague she brought to Yahoo only slightly more than a year earlier. Yahoo shares plummeted on the news.
Niles said he reacted by selling deep-in-the-money call options against his position in Yahoo as a hedge.
"We still think the stock is going to do pretty well despite Yahoo's best efforts to mess it up," said Niles, adding Yahoo continues to benefit from its fast-growing Alibaba and Yahoo Japan assets.