Sohu.com (SOHU, $49.30, up $3.69) is up 8% today after announcing earnings that beat Wall Street’s expectations. The Chinese Internet company reported revenue of $121.6 million, up from $65.3 versus last year’s fourth quarter. Net income came in at $56.6 million, or $1.45 a share, compared with $15.1 million, or $0.39 a share, a year ago. Excluding items, the company earned $1.35 a share. Analysts had predicted revenue of $121 million and $1.16 a share.

The Sohu February 50 calls (UZKBJ, $1.95, up $0.73) are up 60% on the news and options traders are also targeting the March 55 calls (UZKCK, $1.70, up $0.50). I’m not sure if these are good trades because I haven’t looked at the charts but the news has helped Google (GOOG, $379.71, up $8.43).

Google has been on a roll and the February 370 calls (GGDBN, $18.20, up $6.00) continue to surge. These calls were profiled last Monday at $2.30 and I had mentioned them in last night’s Weekly Wrap. Think about that for a minute. If you had bought just one of these option contracts for $230, it would now be worth $1,820 in just one week. Take it a step further and you will see why options are the most powerful investment tool you will ever find. If you had invested $2,300 it would be worth $18,200 in a week.

These are the secrets Wall Street doesn’t want you to know. I had set a stop of $10 so let’s raise that to $15. We have a tiger by the tail and it appears Google could make a run to $400. The next battle ground for the bulls could be the February 400 calls (GOPBT, $4.40, up $2.20).

If Google can reach $400 by next Friday, the February 370 calls will be worth $30. That may me too lofty of a goal but it is possible. Either way, our stop was raised to try capture the most we can without giving back the incredible gains we have made.

Rick Rouse
Rick@OptionsMentoring.com

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