Yahoo (YHOO, news, chart, volatility) was the subject of an interesting spread trade this morning. Shares are down $1.81 to $12.15 after Microsoft’s (MSFT) Steve Ballmer threw cold water on the idea of another takeover bid for Yahoo. In the options market, volume is running double the usual. The top four trades of the day: 7,000 April 10 calls traded on the offer for $4.03 a contract, 7,000 April 30 calls on the offer for 6 cents, and two blocks (7,000 each) of the April 20 calls traded bidside for $1.54 and a $1.55.

All four traded on the ISE at 10:58 ET and appear to be part of a substantial butterfly spread. If so, the strategist paid about $3.00 to enter the spread. The maximum profit is $7.00 if YHOO settles for $20 at April 2009 options expiration. The range of profitability is between $13.00 and $27.00, with the debit at risk if Yahoo fails to move inside the profit zone by expiration.