Jackson Hewitt (NYSE: JTX) is recently down 10 cents to $17.07. JTX is scheduled to report Q1 EPS on September 4. Soleil Group says: "We believe there are too many uncertainties to be aggressive one way or the other; we are maintaining our Hold rating." JTX September option implied volatility of 50 is below its 26-week average of 55 according to Track Data, suggesting decreasing price movement.

H&R Block (NYSE: HRB) is recently up 24 cents to $25.23. Soleil Group has a Buy rating and price target of $28 on HRB. HRB September option implied volatility of 40 is near its 26-week average, suggesting non-directional price movement.

Volatility Index S&P 500 Options-VIX down 27c to 19.48; 10-day moving average is 20.24

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

H&R Block (NYSE: HRB), whose colleagues include Intuit (NASDAQ: INTU) and Jackson Hewitt (NYSE: JTX), reported Q4 and full-year earnings on Monday. The numbers looked pretty good to me. For Q4, revenues increased 11% to $2.6 billion and earnings per diluted share from continuing operations increased 17% to $2.11. According to this article, analysts' expectations were beat by $0.08. For the full year, the top line expanded by 10%, coming in at $4.4 billion. Earnings per diluted share from continuing operations jumped 21% to $1.39.

The tax specialist said it worked with 23.5 million clients, the most ever in its corporate history. That's a nice indication of health for the company, I suppose, but here's a better one. The board decided to juice the dividend. The annual payment will now be $0.60 per share, translating to a 5% increase. Okay, 5% isn't too exciting, I'll grant you, but H&R Block has now increased its payments to shareholders every year for over a decade.

But, as the company stated in its release, although it intends on repurchasing shares over the next few years, it will remain "particularly disciplined" about the subject in the next fiscal year. Essentially, that means shareholders should not expect a lot of share repurchases for a while. H&R Block is reacting to the fact that it is still rebooting itself after being victimized by the subprime mortgage crisis. I'd rather hear a more aggressive stance in terms of buyback plans, but I'd say there is prudent motive in such posture given the company's state.

Merrill Lynch (NYSE:MER) is recently down $1.63 to $36.04. MER call option volume of 10,479 contracts compares to put volume of 69,715 contracts. MER July option implied volatility of 77 is above its 26-week average of 51 according to Track Data, suggesting larger price movement.

H&R Block (NYSE:HRB) is recently down 46 cents to $22.66. HRB is scheduled to report Q4 EPS on June 30. HRB July 20 puts have traded 27 times on transaction volume of 10,492 contracts, above its open interest of 3,670 contracts. HRB July option implied volatility of 47 is above its 26-week average of 43 according to Track Data, suggesting larger price movement.

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

H&R Block Inc (NYSE: HRB) was supposedly going to dispose of its subprime mortgage, use the proceeds to buyback a huge chunk of stock and begin growing its tax business. Further, there was also speculation that following the sale of the mortgage business, private equity might like to scoop the company up.

However, from this week's earnings results and news earlier in the year regarding the complex structure for the sale of its subprime mortgage business, some serious questions have been raised regarding the outlook for this company. In addition, continued weakness in the tax preparation business, its flagship business, raises another red flag.

Recent news regarding Bear Stearns Hedge Fund blow-up with the final settlement-up price for Option One, H&R Block's subprime business, not to be determined until October limits investors knowledge on how much money will be available for share buybacks.

All told, H&R Block is one heck of a franchise name, but, from an investment perspective, appears to be a bet on private equity coming in and paying a premium price. Earning guidance for 2008 is looking pretty weak. If you are willing to bet on the likelihood of a buyout firm taking the company out, buy the stock. However, more evidence of a turnaround in the operations of this business is needed to drive this stock higher in the short term.