1:40pm (EST)

Priceline.com (PCLN, $107.27, up $2.37) reported earnings this morning that were better-than-expected. The stock has doubled from its November low of $45 and is right at support/resistance.

Before the breakdown to the November low, shares had built a solid base between $100-$110. Once $100 was broken, it was a quick 50% haircut. I was looking at the option activity on Friday and noticed a more bullish bias heading into earnings.

The company was expected to report a profit of 93 cents a share. There are 14 analysts that cover the stock on Wall Street and their estimates ranged from 81 cents to $1.03. That represented a 10% earnings surprise either way. Excluding items, Priceline actually earned $1.09 a share, so they beat by 16 cents.

After looking at the trade though, I decided the “implied volatility” was just too much for me to risk going long. I also wasn’t sold we would get that big of a move in Priceline after it reported earnings. Good thing.

The May 105 calls (PUZEA, $3.90, down $1.90) and the June 105 (PUZFA, $8.15, down $0.65) have both lost money today despite the stock’s 2% rise. The point I’m trying to make is that even if you feel 100% certain that a stock will go up, always check the option price to make sure you aren’t overpaying for a position.

ExxonMobil (XOM, $69.14, down $1.24) is down slightly as we head towards the final bell. I had profiled the May 70 calls (XOMEN, $0.65, down $0.55) and the June 75 calls (XOMFO, $0.63, down $0.16) and was more bullish on the June options. I like them here at current levels.

Rick Rouse
Rick@OptionsMentoring.com