Intel, YUM! Beat on Top and Bottom Lines

I love earnings season.  For those of you paying attention, YUM! reported first and beat on both the top and bottom lines.  However, they took a bit of a hit, partly, because they stated the European market was soft, and will remain soft.  Get right out of town.

Intel, on the other hand, killed their quarter.  Their CEO said that was the best quarter they have had in their 40 years of existence, and they also raised guidance going forward.

Fundamentally, I still believe the market is undervalued, and I don't think the three DOW components that have reported will be the only three with this same theme.  I am on the side of the fence that believes the lows for the year are in, and there is money to be made.

If you have been following over the last few days, you would know that I have been playing the SPY $110 calls, as well as the Google $480/$510 call spread.  As of today's close, the SPY call was at $.75 (150% gain), and the Google call spread was at $13.10 (71.24% gain), not too shabby.  As of the close of after hours action in the SPY (following earnings after the bell), the SPY was $.66 above today's close.  This is an even stronger after hours move than last nights, and when I woke up this morning the SPY was trading +$1.00 in pre-market action.  I expect more of the same tomorrow out of the market, and a big gain in my SPY calls.  I am also expecting the Google call spread to move closer to capping itself out.

Tomorrow afternoon I will be raising cash to buy Citi January '11 $7.50 calls at $.04.  JPM will be the first financial to report before the bell Thursday, and we will also see BAC later on.  I expect all of the major financials to beat expectations and take the sector higher.  As such, I want to get into C ahead of the number Thursday pre-market.  Furthermore, I expect to see C beat the $.05 expectations in Friday's pre-market announcement.  C earned $.15 in Q1 2010, and I am looking for a number that is near or slightly higher that performance.  On a valuation side, I believe C is a $5 stock as of Friday's earnings.  Going forward, I see the passage of FinReg to be worth $.25-$.50 to the share price.  I also see the government's complete sale of their shares to be worth north of $1 per share in the stock.  All told, I think $.04 for these options is a huge upside bet.