I thought these calls were quite cheap... Microsoft has fallen from 37 in the past few months, and a couple bucks just in the past week because of the Yahoo mess.

 I think it's win-win-lose for MSFT with Yahoo.  If they take the current terms to Yahoo's shareholders and win, MSFT shareholders will be happy.  If they walk away after Yahoo slapping them, MSFT shareholders will be happy.  However, if MSFT ponies up $35 or $40/share, that would be bad for this trade.