I am considering the same question.  I noticed two different answers to the question in today's email.  I haven't done my own analysis on either of them, but I agree that considering the players, the volatility will implied volatility will remain high.  If you didn't see the news, Google is stiring the pot a little, releasing a statement that said that Microsoft's acquisition might be "an illegal attempt to control the internet."  

Interestingly enough - neither of these suggestions looks good if a higher offer is made for the company.  The first leaves money on the table (although less than selling today), the second will lose you money.

I'm inclined to sell the 30 calls each month until I hear rumors of raising the bid.

IVolatility.com makes this suggestion:Yahoo!

Yahoo! Inc. (YHOO) 28.38. Yahoo provides Internet services to users and businesses worldwide. It also owns 39% of Alibaba, the Chinese B2B web portal.

Our last suggestion for Yahoo was in IVolatility Trading Digest^TM Volume 7, Issue 37, Yellow Light,dated October 29, 2007. At that time Yahoo was 33.63 and we suggested a bull call spread. Long the Jan 32 ½ call and short the Jan 37 ½ call, with a 1.94 debit. We set the stop and/or unwind at a close below 30. Yahoo made a high of 34.08 on October 29, 2007 and did not look back, closing below 30 on November 6, 2007, just 7 trading days later. Following our trade plan we would have closed this position for a small loss.

With Friday's news of the unsolicited bid by Microsoft Corporation (MSFT) 30.45, the stock gapped up 9 ½ points returning Yahoo! once again to the option opportunity list. There are a good number of hurdles to overcome in order for this deal to be completed and it will most likely take longer than most people expect. For example, they will require the approval of the European Union and it has not been very friendly to Microsoft in the past. The process could become long and drawn out testing the patience of shareholders. In the meanwhile, we expect the options market implied volatilites will be rising with each new report expressing uncertainly or doubt. Following the higher price the Historical Volatility rose to 126.49 and while it will now begin to decline we expect rising implied volatility to follow.

We suggest strategies that are long more options that short in order to benefit from the expected rise in implied volatility. We do not suggest the outright sale of longer dated options, as they will be more sensitive to rising implied volatility. Selling shorter dated options would allow the possibility to renew the sale in the next period at higher volatilites. Spreads and synthetics would provide some volatility protection and can be used in combinations.

Here is one example using a synthetic long and near term call sale. First the synthetic:

* Buy Yhoo Jul 27 ½ call YUQGY 3.575 IV 38.60 Delta .6198
* Sell Yhoo Jul 27 ½ put YHQSY 2.455 IV 40.19 Delta .3864
Debit 1.12 Position net delta 1.0062

Then against this position,

* Sell Yhoo Feb 30 call YHQBF .61 IV 52.76 Delta -.3252

Net debit .51 Overall position net delta .6810

We have created a position that costs around a half- a-buck that has the equivalent of 68 long shares with the opportunity to renew the February sale in the event it expires in two weeks. We would then sell a March call against our long synthetic at a higher expected implied volatility than we received for the February call.

As an alternative for those who may be uncomfortable selling puts, buy 100 shares of YHOO and then sell the same February 30 call shown above.

We think there will be many option opportunities in the coming Yahoo! contest and it could last for a long time. We should be able to find interesting new strategies every week.

OptionMONSTER says this:

Traders might still be able to profit from MSFT's takeover offer for YHOO, even if you didn't buy any of those "lottery tickets" that Jon mentioned last week.

The good doctor was referring to the YHOO March 20 call options, which were up as much as 12-fold. InsideOptions flagged the contract before the announcement, due to a trading spike that nearly trebled the open interest, but as Yahoo earnings were also part of last week's picture, the spectacular offer was far from clear.

No matter. Implied volatility remains high for YHOO options and the stock will likely remain in a fairly tight range. Butterfly spreads can take advantage of this situation with limited risk.

A long call butterfly spread involves selling two at-the-money calls and buying one lower strike and one higher strike call to hedge the risk. It can also be thought of as buying a bull call spread and selling a bear call spread.

A butterfly will obtain its maximum gain if the stock finishes right at the strike sold. The maximum risk is the debit paid for the spread. With YHOO at 28.98, the butterfly will profit in a range from below the current stock price to above the MSFT offer price of 31.

Based on the analysis by IBD below, I'll be very careful about selling calls to yank some more profit from the deal.  I'll certainly do it in Feb, since I doubt MSFT will have any motivation to change the offer until after that.

From Investors.com 

Posted 2/5/2008

The value of Microsoft's (MSFT) takeover bid for Yahoo (YHOO) is shrinking along with Microsoft's share price, leading some to suggest that Microsoft may have to sweeten its offer.

The half-cash, half-stock transaction was valued at $44.6 billion when Microsoft made its unsolicited bid for Yahoo on Friday. Since then, the value has dropped to $41.2 billion.

Microsoft's proposal would let Yahoo shareholders elect to receive $31 in cash or 0.9509 of a share of Microsoft common stock for each share of Yahoo. The 0.95, worth $31 early Friday, is now worth $27.64.

Microsoft's falling stock price could be a sign that investors are worried about how far Microsoft will chase the Yahoo deal, Di Bona says. He's heard rumors of the price rising to $40 or more a share.

Given where Yahoo shares are trading - at 28.98, up 51% since the offer was revealed but still short of Microsoft's price - Yahoo investors seem confident that the deal will get approved, Yin says, but not so confident of a much higher bid.