Alibaba's record public offering of shares on Friday further spurred already elevated activity in Yahoo's options, pushing volume on the US Internet company to a one-day record high.
Shares of Alibaba, in which Yahoo holds a big stake, surged 38% in their first day of trading on Friday, valuing the company at $231 billion by the close of trading.
Investors eager for a bite of the Chinese e-commerce giant had turned their attention to Yahoo options in recent days, sending options volume in Yahoo steadily higher over the last month. Yahoo sold $8 billion worth of shares in the offering, but it still has a 16.3% stake in the company.
Options trading in Yahoo spiked to 5.4 times normal, with a record 1.83 million contracts traded, nearly 35% higher than the previous one-day record set in 2008, according to options analytics firm Trade Alert data.
About 1.26 million calls and 568 000 puts traded on Friday. The calls leading puts is consistent with the run-up into the Alibaba IPO over the past two weeks, said Henry Schwartz, president at Trade Alert.
The 30-day implied volatility in Yahoo's options was down about 18.1% at 41.56% on Friday, according to data from options analytics firm Livevol.
The drop in the implied volatility is a result of the "risk" around the Alibaba IPO being out of the way, said Ophir Gottlieb, CEO at Los Angeles-based Capital Market Laboratories.
Yahoo shares lost 2.7% to close at $40.93 on Nasdaq on Friday with about 222 million shares traded, its busiest day since May 2008.
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