Here’s a look at companies that are reporting today:

Bank of America (BAC, $38.56). The company just reported earnings of $1.2 billion, or $0.23 a share on $17 billion in revenue. Analysts had expected earnings of $0.41 and revenue of $16.5 billion. Here again, a mixed report as earnings were below estimates while revenue was higher. BoA’s acquisition of subprime mortgage lender Countrywide Financial should take place later in the year.

Haliburton (HAL, $47.43). The stock is up about 20% for the year and is sitting at 52-week highs. The company earned $584 million, or $0.64 a share. Revenue came in at $4 billion. An overlooked stock by many but a solid performer no doubt.

Merck (MRK, $39.76). The drug company had good things to say this morning as it reported it earned $3.3 billion, or $1.52 a share on revenues of $5.8 billion. Sales we below estimates of $6.1 billion. Merck also said it expects to earn $3.28 to $3.38 a share for the year while analysts expected $3.28. The stock is up 49 cents to $40.25 in early-morning trading

Netflix(NFLX, $38.56). Can you believe this stock is up 50% for the year? The company reports after the bell and forecasts predict the company will earn $0.21 a share on revenue of $327 million. It will be interesting to see how the DVD rental business shakes out. Blockbuster (BBI, $3.07) launched a $1 billion hostile takeover bid for Circuit City (CC, $4.73) which could ultimately help Netflix if it goes through. Some believe that if Blockbuster buys Circuit City it would make Blockbuster less competitive online. Netflix’s earning reports over the past year have been up and down but the bet here is that they at least match or beat expectations. If so, the May 40 calls (QNQEH, $2.35) could see some action.

Texas Instruments (TXN, $29.60). The company also reports after the bell today. Wall Street expects them to earn $0.43 a share for the quarter. I’m not a big fan of TI especially after they missed 4Q numbers and reduced their 1Q outlook last month. The company continues to lose market share and right now it appears that the stock could fall even further. The May 27.50 puts (TXNQY) are selling for 40 cents.

Rick Rouse
Rick@OptionsMentoring.com

6AM
Week in Review

Last weekend (4/12) we discussed the Airline Sector and I was pretty negative on it. Here are the big three with their closing stock price from Friday (4/11) to Friday (4/18):

AMR Corp’s (AMR, $9.48, $8.77)
Delta (DAL, $10.01, $8.75)
Northwest (NWA, $10.96, up $9.69)

Delta and Northwest announced a proposed merger Tuesday. After an initial pop, the Airline stocks got hammered throughout the week before bouncing back Friday with 2%-3% gains. The biggest winner though were the Delta April 10 puts (DALPB) which could have been picked up for 40 cents on Tuesday and eventually finished $1.25 in-the-money. All April options expired Friday.

General Electric (GE, $32.69, up $0.67) held steady dispite missing earnings and putting the market in panic mode. I thought the January 2009 32.50 calls (VGEAY, $2.88, up $0.28) would make a nice buy at $2.00 if the stock continued to fall but they never got that low. That is why it is always good to have targeted entry prices instead of buying an option blind. Of course, there’s a lot of research that goes into any given option trade but knowing the little things will keep you in the game and make your more successful. We may revisit this story in the future…

The financials had a good week. Again, quotes are Friday to Friday closing prices.

US Bancorp (USB, $31.67, $33.56)
JPMorgan Chase (JPM, $41.50, $45.76)
Wells Fargo (WFC, $27.20, $30.40)
Merrill Lynch (MER, $42.88, $47.35)

These companies reported lousy earnings with a painted brighter picture and the market bought it. While I’ll agree the Financials are a bit oversold, these stocks rallied despite the mixed news we got. Like a tide that lifts all boats, I believe the rally in these stocks were on the coattails of Intel and Google which really propelled the market higher. I still don’t trust them, yet. The financial sector was up 5% for the week. Having said that, I wouldn’t be surprised if American Express (AXP, $45.53, up $0.83) rallied as well. Earnings out Thursday. The May 47.50 calls (AXPEW, $1.24, up $0.11) were active Friday.

Crocs (CROX, $10.22, down $0.01) fell below $10 after we mentioned their earnings miss at $11.67.

Potash (POT, $204.67, up $10.12) easily topped $200 and we talked about the momentum when we said “Potash Looks Strong Heading Into Earnings”. The May 200 calls (PYPEX, $18.00, up $5.40) could have been picked up for under $6.50 a contract.

Google (GOOG, $539.41, up $89.87). All I can say is WOW! Reread blog posts…Keep an eye on Baidu (BIDU, $341.00, up $31.25) this week, it is trending up. Can it hit its 52-week high of $429? Baidu’s earnings come out Thursday. The May 400 calls (BPJET, $9.10, up $4.20) were up 85% Friday.

The market has reacted well despite the mixed earnings we are getting. There’s no slowdown this week as more high-profile names announce. Tech rallied 6% for the week and it was good to see a rally in the market — it just creates more volatility as we reach serious resistace levels.

Rick Rouse
Rick@OptionsMentoring.com

When Microsoft (MSFT, $30.01, up $0.79) announced plans to buy Yahoo (YHOO, $28.51, up $0.48) back in February the stock was trading for $32.60. Sure, you can expect a drop in the acquiring company’s stock price and a premium in the company that is being acquired. After analyzing the deal, a week later I thought the Microsoft July 30 calls (MSQGF, $1.81, up $0.35) looked good for a longer-term option play. The calls were selling for $1.75 or so at the time. My reasons were simple. I thought the market had pushed Microsoft down to far at $28.

Much has happened since as you can follow the articles on the situation here:

http://www.optionsmentoring.com/stockoptions/index.shtml

Two weeks ago, Microsoft gave Yahoo until April 26 to accept its current offer and that day is approaching quickly. Microsoft has said it would launch a hostile takeover at a much lower price if the deal doesn’t get done. And the way things are looking, it doen’t appear if Yahoo is going to except.

The July 30 calls have traded as low as $1.00 since I profiled them and as high as $2.10. Today’s move above $30 is the first time Microsoft has traded above this level since the announcement. I had been hoping for a quicker recovery but that is why I went further out to the July calls to allow for more time.

If this deal doesn’t go through by next weekend, Microsoft’s stock could continue higher while Yahoo’s shares could have a real possibility of falling back into the teens. Also noteworthy is that Yahoo reports earnings on Tuesday while Microsoft reports Thursday.

The markets are having a tremendous week with the Dow, Nasdaq, and S&P 500 all up. Certainly we got some great earnings reports this week which has carried the market higher but I’m curious to if the gains will hold. The S&P has challenged the 1400 level three times now this year and has failed to break through. Either we break through this barrier or it will be another faded rally.

Rick Rouse
Rick@OptionsMentoring.com

What a morning. As I mentioned in the blog last night, Google (GOOG, $536.40, up $86.86) was up over $80 in after-hours trading and settled at $525 by 8PM. Those gains held as the stock opened at $535.

The April 500 calls (GOPDO, $39.00, up $38.45) and the May 500 calls (GOPEO, $47.61, up $40.61) made a few people a small fortune today. The April calls represent nearly a 7000% return from yesterday’s close of 55 cents. This certainly would have been a lottery option play but as you can see they do pay off. If you had bought 10 contracts for $550 yesterday, you would now be sitting on $39,000! The May 500 calls returned a solid 515% but pales in comparison to the April call ROI (return on investment).

I wanted to illustrate these two examples because if Google would have failed to impress Wall Street and was trading lower, your April calls would be worthless and your entire investment lost. The May calls would have lost a significant amount of money although they do not expire until next month.

For example, for those who thought Google was going to fall below $400 on a bad earning report most likely would have bought the April 400 puts (GOPPT, $0.05, down $1.30). Although they still have an ask of five cents, the bid is zero. If you would have bought 10 contracts yesterday for about $1400, it is now worthless. The May 400 puts (GOPQT, $0.22, down $6.78) have lost 96% of their value. It would have cost you $7,000 to buy 10 contracts and now that would be worth a whopping $220.

The best play on this would have been a strangle option trade. You could have bought the April 400 puts and the April 500 calls for virtually a risk free trade based on your assumption of at least a $50 move in the stock. As you become better traders you will see these opportunities in the market. However, today’s example is rare but as you can see, totally possible. Google’s move today is its highest dollar move ever since becoming a publicly traded company.

Rick Rouse
Rick@OptionsMentoring.com

Google (GOOG, $454.73, down $0.30) is set to report earnings after the market closes today and analysts are expecting $4.52 per share on revenue of $3.6 billion. The last time the company reported they disappointed the Street and the stock got nailed falling from $584 to a low of $519 that day before finishing the session at $548. Google is down another 100 points since so today’s earnings will be key if the stock can resume its uptrend it had on its march to $750.

Google has faced challenges in the past and could in the future if Microsoft (MSFT, $29.04, up $0.09) and Yahoo (YHOO, $28.09, down $0.22) team up. Their online search numbers will be digested closely. Investors will want to know more about the company’s update on getting into the TV commercial business which is seen as being more effective than traditional TV ad-buying. This is a huge market and it will be interesting on how Google plans to attack it.

Here’s another earnings play that is extremely risky if you are considering going long or short the stock or options heading into earnings. You could almost bet the house on the company’s earnings in the past and expect a pop but after Google disappointed Wall Street once that is no longer a given.

Rick Rouse
Rick@OptionsMentoring.com

When high-flying stocks usually get over a $100 a share it creates many different ways to play the stock and its options. Once a stock gets over $200 or $300 then it really gets interesting on how high strike prices will go. Take First Solar (FSLR, $295.91, up $8.59) for instance which hit an all-time high yesterday of $297. The stock made a run at $300 back in December then fell to a low of $150 in January and has now doubled again.

What’s interesting is that there are May 450 calls (HJPEW, $1.20, up $0.15), June 540 calls (HJPFK, $1.25, up $0.25) and January 700 2009 calls (ZBUAX, $8.70, up $0.20) trading. The January 700 calls actually had volume of 84 contracts. Think about that for a minute. Somebody out there is getting $800 per contract for selling a 700 call and somebody out there is paying $800 for it. Amazing. That’s 400 points away from current levels.

While $300 or even $400 is a possibility, we will have to wait and see if $700 is. Google (GOOG, $455.03, up $8.19) hit a high of $750 so anything can happen. I’ve have written about both companies in the past, and I’m always fascinated by the price swings they can make.

First Solar’s is raking in big money with its solar electric power modules which converts sunlight into electricity. But they do it for a lot cheaper than everybody else The company is in a sweet spot and demand is super strong in Europe and gaining momentum globally. They are based in Arizona and are in discussions with quite a few U.S. utility companies. You can expect some news over the next several weeks or months concerning those discussions especially after the President called for a cap on emissions of greenhouse gases.

The company makes it a habit of just crushing Wall Street’s estimates and growth could come in as high as 50% through 2010. However, if the company can continue to capitalize on cost savings when compared to other firms AND grow their brand commercially on a larger basis, then I can see $400 or $500 somewhere down the road.

Other players in the sector include Trina Solar (TSL, $44.55, up $2.08), SunPower (SPWR, $99.58, $5.16), and Suntech Power Holdings (STP, $47.39, up $2.29). All four had nice runs yesterday but First Solar represents the best when compared to the rest though. I’m not going to give a price target like so many analysts try and do. As an option trader, we are feeding off the huge price swings the stock can make. This is where our Option Mentoring program really comes into play, not just with high-flyer’s but lower priced stocks as well. Do yourself a favor and order the free CD we offer:

http://optionsmentoring.com/freedvd2.cfm

Rick Rouse
Rick@OptionsMentoring.com

8:00AM

Intel (INTC, $20.91, up $0.22) meet Wall Street’s average expectations after the bell on Tuesday by announcing 1Q earnings of 25 cents a share. The company warned in early March that it wouldn’t match estimates because its profits were going to come in slightly below expectations. Analysts then lowered their sales and earnings estimates for the quarter.

The stock moved higher last night in after-hours trading when Intel also reported that it had record sales for the quarter of $9.67 billion which were slightly higher than estimates of $9.63 billion. In after-hours trading the stock was up 8%, or $1.69, to $22.56 at 6PM. However, by 8PM, the stock was down $0.22 to $20.69.

As you can see, after-hour trading (from 4pm to 8pm) can be more volatile and less liquid than regular trading because there are no brokers or market makers. Everything is done using electronic communications networks, or ECNs. For those of you unfamiliar with “after-hour” trading, it is simply the trading of stocks after the market closes. As you know, traditional or regular stock trading takes place from 9:30am to 4pm EST.

Of course, this does not affect the stock’s closing price for the day and the next day gains or losses are quoted from the previous day closing price. This is why I said it would be difficult to figure out what direction the market will take Intel after they reported earnings. This is why it is also risky to buy options around earnings announcements.

Rick Rouse
Rick@OptionsMentoring.com

Have you noticed the strength in Potash (POT, $182.84, up $0.94) lately? The stock is up 40 points since the beginning of the year and is rapidly approaching the $200 level. I mentioned back in January that this stock had a chance to do something special and it certainly hasn’t disappointed.

The company is set to report earnings on April 24 and made a nice 20-point run when it blew away 4Q numbers. The company reported 4Q earnings of $1.16 share while analysts had expected earnings of $0.97 a share.

There’s a good chance their 1Q is pretty much going to be the same way. Remember, the company also started buying back stock when it appeared like it was headed to a $100. Here is what their CEO said at the time: “What happened these last seven or eight trading sessions was just so ridiculous that we felt, if people are foolish enough to want to sell the stock at a cheap price, then we’ll take it from them”.

I also recommended a “strangle” option trade on Potash in January that did rather well. There’s probably a decent strangle trade that is currently available with Potash but with the momentum as strong as it is it may be worth a look to play the May 200 calls (PYPEX, $6.40, up $0.08) straight up. The April option contracts expire THIS Friday so this would allow you more time to take advantage of a run to $200.

Here is the complete article from January:

http://www.optionsmentoring.com/stockoptions/Potash_Update.shtml

Update on the Airlines: Delta (DAL, $9.00, down $1.48) is getting punished in afternoon trading after opening the session higher. The stock is down a whopping 13% while the April 10 puts (DALPB, $1.10, up $0.70) are up an astounding 175% after opening at 40 cents. Seems now the market is questioning the merger and the industry as a whole after being so upbeat this morning. I called that one right.

Rick Rouse
TheOptionInvestor@yahoo.com