Larry --- Some of the happenings with YHOO today. Huge vol.- over 14.5 mill.-P/E 145 - the CFO sold $3.5 mill. of his stock - the stock off .94 today. Do you see puts on the stock? Thankyou Bill

Bill,

I don’t generally make earnings report plays, but since you asked I have a pretty strong feeling that we’re setting up for a “sell the news” decline with upcoming reports. I think there is a good chance that either Intel (INTC) or Yahoo (YHOO) will disappoint with tomorrow evening’s reports. I look at it this way – if the numbers are disappointing the stock should sell off hard. If the numbers are in line with expectations, I think it’s already priced into the stock. So the market might be steady to a little higher on the opening and then sell off as the longs take profits on the news. Only if the numbers really surprise to the upside can I see a strong rally. But given the high expectations that seems to be a less likely scenario. However, it’s important to know that really good numbers would be your risk. And even then you may get a sell the news decline after the stock gaps up on the open.

So I think the edge is on the short side. The Feb 50 puts look okay at about 3.40. Or maybe even the Feb 45’s at about 1.30. That’s if you’re looking to play it in front of earnings. If you want to hold on to it for awhile and you want to be a little more conservative, the July 55 puts at about 9 look pretty good.

Larry

One more thing, Bill. The short interest in YHOO is 5.58%. That's pretty high. It means that if YHOO does report blow out numbers and the stock gaps up you could see something of a short squeeze as the shorts rush to cover. But for the reasons I gave in the previuous post I still think it's a reasonable play.

Larry

Bill pointed to the insider selling in Yahoo. How about Amazon? I haven’t verified the figures, but I understand that the most recent numbers show one insider buy of 20,000 shares and a total of 46 insider sell transactions of more than 3 million shares. It kind of makes you wonder what that one buyer was thinking, doesn’t it?

Larry

Yahoo reported good revenue numbers but guidance is less than spectacular. Intel is more complicated but looks pretty much in line. Apple beat earnings estimates by a penny. The market’s reaction? In after hours trading, as I’m typing this, Yahoo is down almost $3. Intel is down $1 and Apple is down over $1. That’s what I mean by “sell the news.”

Larry