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Current DateTime: 09:10:57 26 Nov 2009
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Current DateTime: 09:10:57 26 Nov 2009
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Current DateTime: 09:10:58 26 Nov 2009
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By: CNBC.com | 14 Apr 2008 | 07:04 PM ET
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Picks and Pans
Earnings season is in full gear. How can you game the market and play the disappointing earnings before they're reported? Jon Najarian, co-founder of optionmonster.com, and Andrew Wilkinson, senior market analyst at Interactive Brokers, both say the key is watching options trading.

Najarian addressed Wachovia's [WB  Loading...      ()   ] surprise first-quarter loss, refinancing, planned job cuts and slashing its dividend. He then noted his own prescient statements to CNBC on Friday: "As I said, there was very strong, unusual activity in WB [options]."

"Somebody knew about [Wachovia's finances] -- I can say that with absolute certainty," said Najarian, who is also a regular on CNBC's "Fast Money."

Wilkinson agreed: "The catchword is always 'volatility'."

He noted traders' "strangle play" on Washington Mutual [WM  Loading...      ()   ] -- but believes that hectic options activity is more a product of "good research" than any special knowledge.

Recommendations:

So what companies' pre-earnings options should investors be watching?

"Take a look at Honeywell [HON  Loading...      ()   ], which reports on Friday," advised Najarian.

He also notes that job-search Web site Monster Worldwide [MNST  Loading...      ()   ] "was hit hard over the past year." Its options activity hints that  "people believe something may be happening."

Disclosure:

Disclosure information was not immediately available for either guest.

Disclaimer

© 2009 CNBC.com
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