Yahoo's fourth-quarter results are expected to show the troubled Internet company is still losing ground to rivals like Google, but the options market shows investors are more concerned with how the company's new chief executive officer Scott Thompson will save the once-leading Internet portal.

Reflecting this, weekly options on Yahoo that expire at the end of this week are showing less action than weekly options that expire in the month of February and March. This suggests the market is focused less on the short-term earnings trade.

"Yahoo shares have been completely dead today which is a little surprising as they are due to report earnings after the close. However, the weekly along the February and March options are fairly active," said William Lefkowitz, options strategist at brokerage firm vFinance Investments in New York.

On January 17, Yahoo Inc co-founder Jerry Yang quit the company he started in 1995, appeasing shareholders who had blasted the Internet pioneer for pursuing an ineffective vision and impeding investment deals that could have transformed the company. Yang's abrupt departure came only two weeks after Yahoo appointed Thompson its new CEO.

Yahoo shares are down 2.6 percent overall for the year, but the stock has gained 1.8 percent since Yang's departure.

"Yahoo has had a pretty good move to the upside over the past few weeks and perhaps some of the other news is going to overshadow this earnings release," said TD Ameritrade chief derivatives strategist J.J. Kinahan.

Earnings estimates are about 24 cents per share, according to Thomson Reuters I/B/E/S.

WEEKLY OPTIONS

Yahoo weekly options are pricing in about a 3.75 percent to 4 percent earnings move for the shares by the end of this week, compared to the one-day average of 4.5 percent after the past four earnings reports, said Steve Claussen, chief investment strategist at online brokerage OptionsHouse LLC in Chicago.

Claussen looked at the weekly January $16 call-$15 put strangle, which was priced at the mid-point between the bid and the ask price, at 27 cents. Long strangle plays involve the purchase of a put and a call with the same expiration date and different - but both out-of-the-money - strike prices. Options traders use strangles to estimate the option market's view of the potential range of the stock's price going into an event like earnings.

"What is interesting is that the most active option is not the weekly which would take advantage of the earnings specifically but rather the February $16 strike call options which have a monthly expiration," he said.

During the midpoint of Tuesday's session, the February $16 calls carried volume of 11,533 contracts with 77 percent of the activity on the bid price, suggesting they were sold, according to options analytics firm Trade Alert.

(Reporting By Angela Moon and Doris Frankel; Editing by Andrea Ricci)

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