×

Trader bets $12 million on new Yahoo highs

From hot to not.

After rising 25 percent last year, Yahoo shares are down more than 8 percent this year. The technology company's stock has benefited from Yahoo's massive stake in Chinese Internet giant Alibaba. But despite the selloff, one trader made a huge bet that Yahoo shares could soon make multiyear highs.

Read MoreYahoo shareholders spooked ahead of news from Mayer

On Thursday, when options volume ran more than two times its daily average, one trader bet over $12 million that Yahoo shares will rally more than 15 percent in the next six months.

Specifically, the trader bought 35,000 July 50-strike calls for $3.50 per share. Since a call option gives an investor the right to buy a stock at a set price within a set time, the trade is profitable if shares are above $53.50 at July expiration.

"This is a really big bullish bet," said Michael Khouw, a CNBC contributor, on Thursday's episode of "Fast Money." The trade was an extension of a previous bullish bet. And according to Khouw, the trader who purchased these call options also bought the stock.

In October, there was similar bullish call buying, said Khouw. "What's really interesting is we saw a tremendous amount of call activity before the stock made the [breakout] that we saw in late October and that was what they were rolling out of," said Khouw.

Disclosure: CNBC has a content-sharing partnership with Yahoo's finance site.

Latest Video

Tutorials

Host Bio

  • Melissa Lee

    Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

Options Action Traders

From Our Sponsor

Options Action Newsletter:

Sign up to receive exclusive Options Action content. Each month you'll receive an exclusive message from host Melissa Lee and insight directly from one of the members of our Options Action panel. Keep your pulse on the market with the Options Action newsletter.

Please enter a valid email address
To learn more about how we use your information, please read our Privacy Policy.