Schlumberger (SLB, $42.82, up $0.70) is trading higher as we head towards the closing bell. The stock has traded as high as $43.37 as the Dow is having a strong day. The 160-point gain to 8828 should put the Dow in positive territory for the month if the gains hold. Oil is also up about $4 to $43 a barrel.

We got into the Schlumberger February 45 calls (SLBBI, $3.00, up $0.35) yesterday at $2.00 as the stock hit a low of $40.14. I had targeted $3.00 as an exit point and the calls are right there. We now have a 50% profit.

I don’t have a problem for those of you who may wish to keep the position open but the trade has already reached the initial target. The market looks like it wants to head higher and that could propel Schlumberger higher as well.

Have a great New Year and don’t forget to check back this weekend for the 2008 year-in-review.

Rick Rouse
Rick@OptionsMentoring.com

Oil is hovering around the $40-a-barrel mark and there seems to be some sentiment that it could be headed higher. Israel has said its attacks on Hamas in Gaza will not be complete until Hamas is completely eliminated. I’m not a big fan of the oil stocks because they can be hard to predict and they usually do the exact opposite of what you think they are going to do. At least that has been my experience.

I still think oil can get below $30 due to the global economy but over the short-term if the escalating violence in Gaza continues, oil could be headed higher. I told myself I wouldn’t trade over the holidays but sometimes my instincts get the best of me.

We will continue to get some price volatility in oil and this trade could be like spitting in the ocean but I like it.

Schlumberger (SLB, $40.48, down $0.43) is the largest player in the oilfield service industry and is trading at 52-week lows. In fact, the stock is down nearly 60% from a high of $110 and may have formed a nice bottom. Take a look at a chart and you will see the support developing here at these levels.

OPEC has also been meeting with an eye toward pushing crude prices higher and I think Schlumberger could benefit from these catalysts. I’m looking at the February 45 calls (SLBBI, $2.35, down $0.10) as a possible trade. I’d like to get them for $2.00-$2.10 as I don’t want to pay someone three days of time premium right off the bat. The market is closed Thursday and the weekend is coming up after that.

Schlumberger is capable of making a 10%-20% move on any given day and hopefully the next one will be higher. The stock opened lower this morning and we may be able to get the call options at our target prices. If the trade is triggered then set stops at $1.25 with an exit of $3.00 or higher.

Rick Rouse
Rick@OptionsMentoring.com

The market managed to do a little something on Wednesday as Wall Street enjoyed the holiday and looks forward to 2009. After a slow start the Dow managed to pull out a gain of nearly 50 points on the strength of the financial stocks. The Dow’s close of 8468 represented the end of a five-day losing streak that started when the index touched 9000.

As we have witnessed over the last month, the Dow seems stuck in a trading range of 8000-9000 and we have done well trading within this range. Matter of fact, we have done well all year as we have nailed a lot of trades. I have been harping on the fact that the Dow can’t hold 9000 but at the same time the index has held above 8000.

On November 21, the Dow hit a low of 7400 while the Volatility Index (^VIX, 44.21, down 0.81) had soared to a high of 80. This was the day the bailout package had originally gotten squashed only to have it revived a few days later with an estimated $800 billion price tag. Although it’s hard to say if this was the “real” bottom, it has provided temporary support if nothing else.

The VIX has fallen roughly in half while the Dow has only managed to gain 1000 points off its low. Obviously, this is why the they call it the volatility index and with trading volume slowing down, the market has stayed in this trading pattern. This has caused the VIX to stabilize as well.

And we should remain this way for the rest of the year unless we get some type of major announcements. However, what will January bring us? There will be fourth quarter earnings due out, a new president will take office, and companies will try and give a clear picture of what 2009 will hold for them. Earnings will be important but Obama will be the wild card.

Oil and the dollar will also be factors but the market will need plenty of good news if it expects to get off to a good start. Many traders will be glad when 2008 is in the books as there were a ton of investors that got swallowed by the market… trying to go both long or short.

With the way the “new” market has become it is imperative that you watch your positions on a daily basis. Check your quotes three, four, or five times a day if you have to. We were successful for calling a lot of right moves because we watched (and blogged) about the market like a hawk.

If you aren’t educated about options and how they work, then you are swimming against the current. With pensions funds vanishing and 401K’s getting wrecked, why wouldn’t you want to manage your own retirement account? That’s what we teach here. We teach you how to manage a portfolio where your results are based on what you do. I like those odds and I’ve liked them ever since I dumped my broker back in the 90’s.

As you look towards 2009, ask yourself where you want your portfolio to be. Take the time to learn the market and how options work. Start slow if you are new. Eventually you will get there.

I’m working on a 2008 year-in-review blog for next week so my entries will be light as we wind down the year. I’ll try and cover all of the jaw-dropping events that took place and I’ll review how many of our option trades fared for 2008.

Look for a so-so day on Wall Street. Most of the market veterans took the day off and just made it a long weekend.

Rick Rouse
Rick@OptionsMentoring.com

The market endured its fifth straight losing session on Tuesday after a couple of gloomy economic reports set the tone for the day. The Dow managed to get off to a good start and traded to a high of 8,600 before falling 100 points, to close at 8,419. So much for the Santa Claus Rally.

The Nasdaq dropped 11 points to finish up at 1,521. The S&P 500 gave back 8 points and settled at 863. Trading volume has been light this week as many on Wall Street are on vacation for Christmas. Expect an even lighter day today as the market closes at 1pm EST.

Back to Economics 101. The most disturbing economic report was the fact that sales of new homes fell to the slowest pace since 1990, while prices of new homes dropped by the biggest amount in eight months.

Sales of existing homes fell nearly 9% in November to an annual rate of 4.5 million from a downwardly revised pace of 4.9 million in October. Naturally, the numbers were off and basically means we’ve got an 11-month backlog. I don’t see a turnaround in housing until next summer but with mortgage rates starting to pop up under 5%, we could get a wave of new first-time buyers.

Feeling left out, the Commerce Department also wanted to be the bearer of bad news as it chimmed in saying 3Q gross domestic product fell at an annual rate of 0.5%.

Oil prices dipped below $38 a barrel and there’s talk they could be headed below $30. I’m not sure what the Vegas over/under is for oil but there are many on Wall Street that see the recession worsening (really?). People are driving less and staying home more often. With winter in full force, I’ll take the under.

And if you hear folks talking about gas falling below $1 tell them you got the scoop. Oil would need to get below $20 for that to happen so if we can get to $30 we could see $1.25 for gas, depending on where you live of course.

With the market closing early, I wanted to take this time to wish everyone a Happy Christmas! Thanks to all of you who continue to read the blog and send me emails. If you haven’t sent me an email, again, my inbox is always open to any questions you may have about options or the market in general.

Ho, Ho, Ho, I’ll be back Friday!

Rick Rouse
Rick@OptionsMentoring.com

The futures are down, pointing towards a lower open this morning. The Dow futures are off by 14, to 8,525, while the Nasdaq futures are slipping by 3, to 1,194. The S&P 500 futures are unchanged at 873. Earlier this morning, the market was looking to open in positive territory as futures we up but have reversed course as we are about 45 minutes from trading.

I had mentioned in the weekly wrap that the trading volume could be light this week and yesterday was no exception. Many traders seem to be steering clear of the market due to the holiday-shortened week and the market held up rather well on Monday despite Toyota Motor (TM, $60.88) dropping a nasty bomb.

The stock drop $4.50 yesterday after the company forecast its first operating loss in 70 years. Toyota said it will post a $1.7 billion, or 150 billion yen, loss in the upcoming quarter. The automaker had previously forecast a profit of $6.5 billion. Toyota’s president said they we’re “facing an unprecedented emergency situation” and added “unfortunately, we can’t see the bottom.” This could have a ripple effect on Japan’s economy. As you can imagine, the January 60 puts (TMMY, $3.80) had a huge day and easily doubled on the news. I wouldn’t go chasing here but these options could pick up steam if the stock continues lower.

Walgreen (WAG, $24.98) was the shoe on the other foot as it missed Wall Street’s expectations by a nickle. The company reported earnings fell to $408 million, or $0.41 a share, down from $456 million, or $0.46 a share, from a year ago. Quarterly sales did improve by nearly 7% but same-store sales were only up 1.7%. The company’s bread and butter are its prescription sales which rose 6.2% from the prior year and accounted for 65% of sales. The stock was down $1.10 on Monday.

As far as today, we got a couple of economic reports that the market didn’t digest too well this morning and it could be an uphill battle for the market close higher today.

Rick Rouse
Rick@OptionsMentoring.com

Take-Two Interactive Software (TTWO, $9.07, down $3.00) is down 25% after reporting lousy earnings. The company posted a loss of $15 million, or $0.20 a share, which doubled the loss of $7 million, or $0.10 cents a share, from a year ago. Even worse, Take-Two said it now expects earnings to range from zilch to $0.20 a share for next year. Wall Street had forecast an estimate of $1.21. Whew!

We should have seen this coming after Electronic Arts (ERTS, 16.75, down $0.47) warned earlier this month that its year-end earnings would fall short of its expectations. The company blamed disappointing holiday sales, but “analysts” said that should not be viewed as an indication of Take-Two’s performance.

Yeah, and we were suppose to believe that one? If one company says sales are weak, it’s going to effect others. Although Take-Two has some premium games, the enthusiasm has peaked to some degree.

It would have been a risky trade but here is one case where a put option on Take-Two would have paid off. The December 10 puts (TUOXB, $1.00, up $0.80) are up 400% and I have to admit I blew that one (sly grin). I had mentioned in the Weekly Wrap that the company would be reporting earnings this week and a $200 all-or-nothing trade would have been worth a grand. Pretty sweet.

What is still hard to believe is that Take-Two turned down Electronic Arts offer of $27 a share months ago to buy the company…

Rick Rouse
Rick@OptionsMentoring.com

The market started Wednesday off in the red and managed to turn things around in the afternoon before giving up its gains in the final two hours. There wasn’t any panic selling and it appears both bulls and bears are waiting to see how Friday unfolds with Triple Witching. Then again, the Volatility Index (^VIX, 49.84, down 2.53) was at 80 just three weeks ago and is now below 50. As the VIX continues lower, the market gets more confident.

Although the VIX retreated, the Dow finished lower by 100 points and closed at 8,824. The S&P dipped 9 points to 904 while the Nasdaq slipped 10 points to 1,579. Once again, the Dow couldn’t penetrate the 9,000 level and several more failed attempts would not be good.

The dollar tanked after the market had a full day to digest what the new Fed rates will do for the economy. The dollar dropped more than 4 cents to $1.44 versus the euro. Over the past week, the dollar has plunged nearly 10%, moving well away from October’s two-year high of $1.23 versus the euro. The Fed frenzy is weakening the dollar but we got a ways to go before we should panic.

Of course, I’ve been bleeding yellow as the gold stocks have rallied but all of our positions hit their stops yesterday.

Barrick Gold (ABX, $35.49, up $0.58) traded as high as $37.84 and our December calls were closed for a 100% return while the January calls were closed for about a 30% gain.

Goldcorp (GG, $30.62, down $1.03) fell 10% from its high of $33.20. The December 30 calls (GGLF, $1.25, down $0.90) traded as high as $3.30 and were profiled at $1.65 Monday morning. Good thing we set that $2.90 stop, huh? The January calls returned 25%.

It was all downhill for Newmont Mining (NEM, $39.17, down $0.84) after the stock hit a high of $41.79. The December calls were closed for a double while the January calls returned about 35%.

All-in-all these were great returns for three days worth of work. Gold finished at $868 an ounce, up $26, and could continue higher. I’m not quite sure if gold will break $1000, let alone $900, but it worked well for us this week. There will be another opportunity to trade gold again (we have traded gold numerous times this year) and we made a few triples this time around.

The last time gold broke $900 was September 23 when gold prices surged more than $44 an ounce to settle at $909 for the day. That was the same day oil jumped $25 to over $130 a barrel. Those were huge moves but now gold is at $870 while oil is at $40. See what I’m saying…

Rick Rouse
Rick@OptionsMentoring.com

Gold is up strong this morning as the yellow metal is higher by $27 and now stands at $870/ ounce. I’ve been talking about the correlation between gold and a weak dollar and the gold trades outlined on Monday have been low risk/ high reward. I have been expecting a continuation of the sell-off in the dollar and today’s move in gold could put it on a track to $900 by the end of the week.

This week’s “triple witching” options expiration on Friday could have a big effect in both gold and silver. If gold continues higher it will fuel the buying in the shares of gold producers. Barrick Gold, Goldcorp, Gold Fields and Newmont Mining all are moving higher today.

Barrick Gold (ABX, $36.90, up $1.99)

The December 35 calls (ABXLG, $2.15, up $1.00) were going for 80 cents. Set stops at $1.60 and remember they expire this Friday. The January 35 calls (ABXAG, $4.10, up $0.90) were profiled at $2.70. Set stops at $3.75.

Goldcorp (GG, $32.65, up $1.00)

The stock is up $2 in two days and the December 30 calls (GGLF, $3.00, up $0.85) are now deep in-the-money. They haven’t quite hit a double from an entry price of $1.65 but set stops at $2.90. The January 30 calls (GGAF, $4.60, up $0.60) were at $3.50 and are up 30%. Set stops at $4.25.

Gold Fields (GFI, $9.78, down $0.30)

The December 10 calls (GFILB, $0.20, down $0.30) were profiled at 50 cents. They hit a high of 70 cents when the stock hit $10.10 but are quickly fading. The January 10 calls (GFIAB, $1.20, down $0.10) closed yesterday at entry prices but are down 8%. Gold Fields has always lagged the “Big Three” and really, probably, should’ve never made this list.

Newmont Mining (NEM, $41.59, up $1.49)

The December 40 calls (NEMLH, $2.00, up $0.70) were trading for $1 and you could close positions now for a 100% return. We will keep the January 40 calls (NEMAH, $4.30, up $0.70) open which were profiled at $2.85 and are showing a gain of over 50%. Set stops at $3.90.

It looks like NovaGold Resources (NG, $2.87, up $1.15) is going to get the $20 million it needs to survive. The stock was trading at $1.30 and I had mentioned the heavy volume it was experiencing as the bears were circling the wagons. Three weeks ago the stock dropped 80%, from $1.70 to 58 cents, when the company announced that it might not be able to repay the loan. Don’t get caught up in the hype.

Rick Rouse
Rick@OptionsMentoring.com

Looks like Wall Street got an early Christmas present after yesterday’s surprise Fed announcement concerning interest rates. Most experts had expected the Fed would cut the rate for overnight loans between banks from 1% to 0.5% but jaws hit the floor when the Fed said it use “all available tools” to deal with the current economic crisis. The rate now stands at a range of zero to 0.25%. Amazing.

The news sparked a big rally as the Dow surged 360 points, or 4%, to close at 8,924. The S&P 500 jumped 45 points to finish at 913 while the Nasdaq outperformed both, charging higher by 5.4% and settled at 1,589. More on the Nasdaq in a minute.

Naturally, the flood of money had an adverse effect on the U.S. dollar which fell hard after the FOMC made its statements. A weak economy and low interest rates are not the best elements for a rising dollar which had done well against other currencies recently. However, we got a new ballgame now.

Oil prices slipped about $1 to $43.55 a barrel ahead of today’s OPEC meeting. There is talk they could cut production by 2 million barrels per day so the market will be watching this event closely. Despite the drop in oil, gold put in a good day as it added $6.20 and now stands at $842.70/ ounce. Good news for the gold stocks as well. The gold trades from Monday morning’s blog are up 20+%.

The surge in the Nasdaq also paid big dividends for our PowerShares QQQ Trust (QQQQ, $30.56, up $1.40) trade. The December 29 calls (QAVLC, $1.65, up $0.72) were originally profiled at 80 cents and were going for $1.15 before the Fed announcement. Our initial target was $1.20 so if you held out you gained another 30% which now makes the trade a solid double from our original entry price. If you closed the trade out before the market closed on Tuesday, good for you. If you sold half and kept the other half open then you could be looking at further gains if the market continues to rally.

Goldman Sachs (GS, $76.00, up $9.54) added on another $4.50 after I mentioned their earnings yesterday morning. If hindsite is 20/20 then I should’ve pounded the table on the December 75 calls (GSLO, $3.55, up $2.30) which were going for $1.50 at the time. I told you there would be some action in the calls but they were too rich for my blood. They traded to a high of $4.70. Yeap, we could have turned $1,500 into $4,700 in a matter of hours…

Futures are pointing towards a lower openimg this morning so I wouldn’t be surprised if these two trades gave back a little of their profits to start the day. However, it will be interesting to see if the Dow can take out 9,000 and if the Nasdaq can trade past 1625-1650 today and add to yesterday’s gains. With 15 minutes to go before the opening bell, the Dow futures are down 81, Nasdaq futures are down 6 while the S&P futures are lower by 10.20.

Rick Rouse
Rick@OptionsMentoring.com

I put out a trade yesterday morning that is off to a good start. The Dow is enjoying a triple-digit gain on the heels of a historic FOMC meeting. More importantly, the Nasdaq is outperforming the Dow as it is up over 2%, or 35 points, to 1,543. The PowerShares QQQ Trust (QQQQ, $29.85, up $0.69) look poised to break $30 if we can continue the rally and get an even stronger close.

We took a look at some December options that I said could easily experience 20%-25% swings during the trading day this week and here we are. I wanted to provide some insight to the trade and why I decided to go long. The December 29 calls (QAVLC, $1.15, up $0.22) were going for 80 cents and I was pretty bullish on the market’s direction this week. I had did my homework over the weekend and looked at the past trading patterns of “triple witching” week. I had also factored in the barrage of news that would be hitting the market and how sentiment could be turning. I normally play options on stocks but I figured there was a chance to make a quick return by playing the market straight-up.

Things got even better when as we got a break when the market opened lower on Monday morning and we were able to get into this position at 80-85 cents. My initial target was $1.20 as an exit. Well, we’re right there heading into the Fed meeting. If you close the trade right now you walk away with a 50% return in less than 24 hours. If you hold out and the market takes a dive on the Fed news, you will quickly see a loss. However, if the market continues its rally, you could make even bigger gains. You could also close half out and let the rest ride.

Welcome to the life of an option trader…

Rick Rouse
Rick@OptionsMentoring.com