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Bartz's Boatload

Whenever I think of about the Yahoo-Microsoft deal, I'm reminded of the closing lines of "Jerry McGuire," when Tom Cruise tells his wife that she completes him.

But in truth, the better line to describe the deal came earlier in the film, when Cuba Gooding Jr. screamed "Show me the money."

Equity and option traders have been in a tizzy of late over a possible Microsoft/Yahoo hook-up, with the stock's massive 20% rise being echoed by heavy out-of-the-money call buying at the August 16- and 20-strike, something we flagged on last week's show.

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Part of that euphoria centered around comments company CEO Carol Bartz made during the last earnings call. “If there’s boatloads of money and the right technology involved, would we do a deal? Sure.” Bartz said in typical brash style.

But when today's deal was announced, much to the dismay of investors, that boat sank, and with it, so too did the money.

"We were talking to investors last week who were looking for $4 billion," said Heath Terry, equity analyst over at FBR Capital Markets (SELL). "But I'm not surprised. Microsoft held almost all the cards. Because of Bartz's comments and the deal on the table last year, expectations got out of hand, and management did little to tamp them down."

Still, some think the 10% sell off today is a little harsh.

And it's not entirely clear the deal will get approval.

"One has to ask, "Why would Carl Icahn vote for such a bad deal?" mused Dan Nathan of "Options Actions"fame (who actually likes "Jerry McGuire"). "No cash upfront?" asked Nathan, contempt oozing in his voice.

Today, options traders reined-in their bullish bets, licked their losses and sold back many of those out-of-the-money calls. But there was some activity today that suggests a better deal could be in the offing, with some options traders buying the September 17/19 call spread, a trade that become most valuable if Yahoo hits $19 by the September expiration.

Maybe by then, Bartz will have her boatload.

Questions, comments send them to us at: optionsaction@cnbc.com

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