eBay (EBAY, $14.78, up $0.49) announced its earnings dipped over 20% after the bell but their numbers still beat Wall Street’s expectations. The company earned $357 million, or $0.28 a share, versus $460 million, or $0.34, a year earlier. The Street was expecting $0.34 and if you exclude charges, eBay actually did 39 cents. In after-hours the shares are up 77 cents to $15.55.

The good news is that Amazon.com (AMZN, $79.20, up $0.46) is also up in extended trading to $81. The stock hit a high of $82.18 today and their big day is after the bell on Thursday. We didn’t have a position in eBay but we did with Amazon.

Many of you got in the May 90 calls (ZQNER, $2.00, up $0.40) at $1.40-$1.50 on Monday and these calls hit a high of $2.38 today. That is pushing a 70% return before earnings come out which means you should have been closing partial positions.

Yes, it looks good that eBay got a lift and Amazon is up in after-hours but when you start getting profits of 75%-100%, take some off. Not only that, you eliminate the risk of being at the market’s mercy after the earnings come out and you are long or short.

We are seeing totally different reactions to earnings reports and there is no way to predict what will happen. Morgan Stanley (MS, $22.44, down $2.21) almost made it in the green after reporting that it lost 57 cents a share for the quarter versus expectations for a loss of 8 cents. The stock finished 9% lower by the end of the day but Wall Street almost rewarded the company but bidding the shares higher.

Morgan isn’t in that bad of shape, don’t think I’m picking on them, but I’m showing you just how tricky earnings season can be. You have to read between the lines and you have to know what “implied volatility” can do to your positions. In fact, implied volatility can actually hurt you even if the stock price moves in the direction you expected.

Look at VMWare (VMW, $32.55, up $2.33). The stock was strong all day going into earnings and I said that people were buying the May 35 calls (MKTEG, $1.50, up $0.75) at $1.40. They made it to $1.80 but the smart option traders got out before earnings.

The point is, you can “daytrade” some of these options by buying them in the morning and getting out before earnings. There are some trades that I like to hold during earnings because the real move is going to come in the days (and weeks) after the announcement and I always provide entry and exit points so I know my risks.

I explain more of this in the new option trading manual but the bottom line is…don’t waste your profits in Amazon or let them slip away because you are greedy. The key to trading earnings season is hitting singles, not homeruns. The homeruns will come (see Dendreon) but in the meantime, take what the market is giving you.

Rick Rouse