This is a Guest Blog from CNBC Contributor Brian Stutland.
Yahoo reported earnings after the close on Monday, and fell 3 percent in Tuesday's trading. Revenue and profit per share beat expectations, but guidance was slightly below expectations (Read More: Yahoo Earnings Beat; Revenue Outlook Is Light.)
Nonetheless, one option trader used the stock's weakness to sell 4000 July 19-strike puts for $0.91 each, with the stock at $19.74. This trade suggests that the trader is willing to buy Yahoo at an effective price of $18.09 (8 percent lower) in July, and is happy to collect $0.91 (a 5 percent return on capital) if Yahoo is above $19 at July expiration.
The Yahoo earnings report was full of mixed news.
On one hand, the company did beat expectations, posted lower TAC ("Traffic Acquisition Costs"), and improved search revenue and paid clicks by 11 percent year-over-year. However, guidance was weaker than expected, and display advertising revenue was disappointing.