Note: The Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.

Volatility Index S&P 500 Options-VIX up .63 to 11.07.

New Century Financial Corp. (NYSE:NEW) implied volatility & put volume Aggressive on Subprime risk

New Century Financial is a real estate investment trust, providing mortgage products to borrowers nationwide, is recently down $1.95 to $17.29. New Century Financial sold off 35% yesterday after announcing it would restate operating results for the first three quarters of 2006. Roth Capital says, "we have no reasonable basis on which to calculate estimates of GAAP earnings, taxable income, dividends or fair value. We are, therefore, suspending our estimates, price target and rating."

New Century Financial call option volume of 16,187 contracts compares to put volume of 41,414 contracts. NEW March option implied volatility of 92 is above a level 69 from yesterday and its 26-week average of 43 according to Track Data, suggesting aggressive price fluctuations.

As Melly Alazraki mentioned in her post last night, everyone is mourning, alas poor Yahoo!: the real loser in the Google-YouTube deal. And the best defense is a good offense, right? So naturally the lips of investment bankers are wet with the licking. I can just see (in my imagination silly! I don't have spies) the acquisition pitchbooks being pitched left and right all over Terry Semel's desk.

Is Yahoo! Inc. (NASDAQ:YHOO) buying? And if the company is keeping its fax machines busy with term sheets, who might it buy?

Yahoo!'s never been afraid of a good little acquisition. Hello, Flickr, hello, Facebook.com? Interested parties have mentioned names like Dabble (a sort of online TV Guide, and no, I never heard of it either), Heavy.com (whose co-CEO says that, although he's not selling, he'd of course consider a deal with "a good exit strategy," haha) and our own Tom Taulli's favorite, vMix, whose CEO spoke not a word of acquisition talk in his interview with us.

But Melly makes an excellent point: shouldn't Yahoo! finish Project Panama first? How the heck could the company even monetize an acquisition right now? Maybe eBay should be the one out there buying. Yeah!

I can just hear the investment bankers scurrying back to their PowerPoint files now and doing replace-all for "synergies with" from "Flickr" to "Skype" ...