Snap-On Inc. (SNA: sentiment, chart, options) has surged 9% so far today following a positive earnings surprise. The company raked in a second-quarter profit of $66.9 million, or $1.15 per share, exceeding analysts' expectations for a profit of $1.05 per share. Sales for the period rose about 8% to $766.1 million, with strength overseas offsetting softness in North America. Additionally, Snap-On offered investors a rosy outlook, noting that "sales and earnings for the balance of 2008 will continue to exceed 2007 levels."

Option traders were likely caught off guard by the well-received report. The stock's Schaeffer's put/call open interest ratio is resting at 2.44, which indicates that there are more than 2 puts for every 1 call among near-term options. This lofty ratio is just 1 percentage point away from an annual peak.

The International Securities Exchange also reports extremely high levels of pessimism toward the shares. The exchange notes that traders have purchased 20 SNA puts to open for every 1 call during the past 10 trading days.

Short sellers are also feeling the squeeze; short interest ramped up by more than 37% during the most recent reporting period, and now accounts for 6.6% of the stock's available float. Overall, the overwhelming amount of skepticism levied against SNA could translate to a prolonged post-earnings rally.