WSJ.com - Traders Bid Up Yahoo's Calls, Expecting a Big Rise: "Mr. Ruffy traces the increased trading in Yahoo's short-term calls to recent speculation that the Sunnyvale, Calif., company might be in talks to establish a partnership with software titan Microsoft Corp. Rumors of the online search-advertising alliance surfaced after Google Inc. and Time Warner Inc.'s AOL last month agreed to team up. Yahoo and Microsoft have some history of working together, inking a deal in October to make their competing instant-messaging services compatible with each other."
I came across a rumor elsewhere this morning that Microsoft recently offered $80B to acquire Yahoo! (current mkt cap ~$54B). Clearly Microsoft and Yahoo! have lots of incentives to collaborate, considering Google + AOL etc.