Sara Lee (SLE) has rejected an offer from a group of private-equity firms that includes Bain Capital, Apollo Management and TPG Capital, the New York Post reports. Overall option implied volatility of 20 is below its 26-week average of 24, according to Track Data, suggesting decreasing price movement.

PepsiCo (PEP) is expected to report Q4 EPS on February 10. Overall option implied volatility of 17 is near its 26-week average, according to Track Data, suggesting nondirectional near-term price movement.

Options Update is by Stock Specialist Paul Foster of theflyonthewall.com.

As the economy rebounds and credit markets warm up again, it looks like private equity firms are going back to work -- on big deals. According to Bloomberg.com, Apollo Global Management is prepared to offer $12 billion for Sara Lee (SLE). The transaction would also include investor C. Dean Metropoulos -- who bought Pabst Brewing in 2010 -- as well as Bain Capital and TPG.

It looks like this is a viable offer even though a strategic buyer is interested (which often can justify a higher valuation). This is JBS SA, a beef processor based in Brazil. An acquisition would certainly have lots of synergy, creating a vertical operation. Interestingly enough, JBS may seek the help of the Blackstone Group (BX).

ConAgra (CAG) is expected to report Q2 EPS on December 21. The company lowered Q2 guidance on December 9. January and March put option implied volatility of 22 is above its 26-week average of 19, according to Track Data, suggesting decreasing price movement.

Sara Lee (SLE) the Wall Street Journal reported a sale or break up is possible. January call option implied volatility is at 33, February is at 31, above its six-month average of 25 according to Track Data, suggesting larger price movement.

Options Update is by Stock Specialist Paul Foster of theflyonthewall.com.

Sara Lee Corp. (SLE) isn't far from its 52-week high of $15.40. At the time of this writing, the quote was valued at $14.30. The shares have traded in a narrow range over the last twelve months; the 52-week low is $9.17.

The stock is experiencing selling pressure (it's currently down 1%) following the company's fiscal Q4 report. According to this article, adjusted profit of 19 cents per share beat the consensus by three pennies. Furthermore, the actual press release states that cash from operations came in at $952 million over the past four quarters; in the comparable period, the business generated $900 million from operations.

"Nobody doesn't like Sara Lee (SLE)?" Think again. Swiss company Nestle has filed a lawsuit against the Illinois-based food giant, claiming patent infringement of the Nespresso coffee system. While the Swiss are known for staying neutral, Nestle felt compelled to seek legal action in an effort to protect its highest-selling product.

Nespresso is the business model that keeps on giving ... once customers buy one of the high-end machines, they also need to buy capsules of blended coffee (available in 16 varieties of varying flavors and intensity). The machines run from $199 to $599 and the capsules are about 55 cents apiece (which provides one cup). That 12-cup-a-day habit can add up quickly.

So ... how was your trading week? Mine wasn't so hot. But I guess we need to keep sifting through all those stocks that are now sporting claw marks courtesy of the growling bears who are now in control to figure out which ideas should be given a round of due diligence and which ones should be thrown by the wayside.

Let's check out Sara Lee (SLE). I like the one-year chart. The 52-week low on the stock is $8.71; the 52-week high is $14.36. The shares closed down by a mere three pennies on Friday to settle out at $13.44.

Sara Lee (NYSE: SLE) closed at $10.54. Unilever (NYSE: UN) agreed to buy SLE's personal-care and European detergent unit for $1.88 billion. SLE's board of directors authorized a $1 billion share repurchase program. SLE October option implied volatility is at 39, November is at 38; near its 26-week average of 38 according to Track Data, suggesting non-directional price movement.

MSCI Brazil Index (NYSE: EWZ) is recently up 37 cents to $65.04 in pre-open trading. Brazil Bovespa Stock Index is up 0.1%. EWZ call option volume of 14,379 contracts compares to put volume of 22,765 contracts. EWZ October option implied volatility is at 37, October and January is at 38; below its 26-week average of 45, according to Track Data, suggesting decreasing price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

General Electric (NYSE: GE) closed at $16. GE is scheduled to host a Global Research Analyst Meeting on September 17. GE options were active on volume of 812,432 contracts. GE October option implied volatility is at 47 and December is at 43; below its six-week average of 55, according to Track Data.

Sara Lee (NYSE: SLE) closed at $10.00. SLE's analyst meeting today will review fiscal 2009 and discuss future growth strategies and initiatives. SLE October and January option implied volatility of 34 is below its 26-week average of 38, according to Track Data, suggesting decreasing price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Here are some highlights from last week's earnings coverage from BloggingStocks:

• Applied Materials Inc. (NASDAQ: AMAT) posted better-than-expected Q3 results, sending shares higher.
• AutoDesk Inc. (NASDAQ: ADSK) reported better-than-expected Q2 earnings, sending shares higher.
• Blockbuster Inc. (NYSE: BBI) had another disappointing quarter as same-store sales declined.
• CIT Group Inc. (NYSE: CIT) delayed its Q3 report due to ongoing debt restructuring and a possible bankruptcy.
• Dr Pepper Snapple Group Inc. (NYSE: DPS) Q2 earnings came in well ahead of Wall Street expectations.

Don't look now, but Sara Lee (NYSE: SLE) is up about 20% in the past month. People gotta eat, and, thanks to the recession, they're opting to eat at home more often.

Sara Lee reports earnings on August 12, and analysts expect earnings per share to be 5 cents less than a year ago. Last quarter, the company blew out the estimate by nearly 40%.

With sentiment mixed (only a third of analysts rate the shares a "buy"), another beat this quarter should keep the rally intact.

Buy SLE call options.

Next: Earnings Trade #4

Beating the Street at the earnings game is all about knowing the market's true expectations for a stock.

Knowing the market's expectations -- not just the analyst expectations -- for a stock will often provide the edge necessary to turn earnings season into a profit opportunity.

The more data and trends you can look at to determine not only what investors expect, but also how investors are positioning themselves for the expected move, the better.

• Deutsche Bank upgraded Portland General Electric (NYSE: POR) to Buy from Hold on valuation as it finds the risk/reward on shares attractive at current levels. The firm raised its target price to $22 from $20.
  
• FBR Capital upgraded Abercrombie & Fitch (NYSE: ANF) to Outperform from Market Perform after channel checks indicated recent sales are driving increased traffic and easing market share losses. The firm raised its target price on shares to $37 from $21.
• Barclays upgraded Yahoo (NASDAQ: YHOO) to Overweight from Equal Weight as it believes the company is well positioned for a rebound in advertising and that the valuation is compelling at current levels. The firm raised its target on shares to $20 from $15.
• Kohl's (NYSE: KSS) was raised to Overweight from Market Weight at Thomas Weisel.
  
• U.S. Steel (NYSE: X) and CB Richard Ellis (NYSE: CBG) were upgraded at Goldman to Neutral from Sell.
  
• Dolby Laboratories (NYSE: DLB) was upgraded at JP Morgan to Overweight from Neutral.