Mad About Options takes a look at the stocks getting coverage from Jim Cramer, Fast Money casts and other heavy hitters in the financial press and reviews strategies option traders might have used if they agree or disagree with these assessments of the underlying stocks.

The Pick – Yahoo! Inc. (YHOO):

Yahoo! announced earnings after the close on October 20. Their results of 13 cents per share topped analysts’ expectations by six cents.

Bullish Option Traders on YHOO:

Bullish investors who see continued upside for Yahoo could buy bull call spreads, selling two January 2010 11-strike calls for $5.20 each and selling two January 16-strike calls for $1.20 each, paying a net cost of $8 (or $4 per spread). This strategy will be profitable if YHOO shares expire higher than $15. Maximum gain on this trade is $2.00 minus commissions, and maximum loss is $8.00 plus commissions.

Bearish Option Traders on YHOO:

Bearish investors could buy bear put spreads on YHOO by buying two December 20 puts for $4.00 apiece and selling two December 16 puts for 80 cents each, resulting in a total net cost of $6.40 ($3.20 per spread). The strategy will be profitable if Yahoo! shares close below $16.80 at December expiration. Maximum gain on this trade is $1.60 minus commissions, and maximum loss is $6.40 plus commissions.

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