Lehman Brothers (LEH, $15.82, up $2.10) is trading higher this morning on news that the Korea Development Bank was considering a bid for the company although nothing is official. According to the story, the Korean bank didn’t reach an agreement with Lehman because it is still worried about the company’s debt. Lehman’s stock has been punished as it struggles to raise capital due to the subprime exposure mess on its books.

There’s also chatter that Lehman discussed the sale of a 50% stake with KDB or China’s CITIC Securities on Thursday, but those talks are said to have failed because both companies felt the asking price was too high. Wall Street is also saying that Lehman’s is trying to find a buyer for some of the bank’s business and was looking for a $20 per share acquisition price.

I don’t know if that’s going to happen but the pressure cooker is on. Either way, we have already been rewarded with one of our call option plays. Lehman opened up this morning at $15.80 and I’m not sure if we will go much higher than that today. Usually these types of events give a stock a big pop in the morning and it slowly drifts lower the remainder of the day.

The January 20 calls (LYHAD, $2.40, up $0.40) opened this morning at $2.40 which is well over our exit target of $2.00. The calls were profiled at $1.40 and a $2.00 stop would have given us a 40% profit. We are now looking at a 70% profit and it would be wise to close the position or at least half of it. I’ll provide an update later in the day on our other positions.

Rick Rouse
Rick@OptionsMentoring.com

We created a Mining Watch List back on May 22 for a few companies that provided us with some trades to go long. By mid-June we were out and since then, all four of the stocks have been hammered to levels where I think it’s time to go long again.

I will list some call options that will require you to do your own homework because the only ones I really like are the copper plays. The other sectors like steel and aluminum have been hit but I think cooper is the better play. We will compare prices from May to where these stocks are now and go from there.

BHP Billiton (BHP, $70.89, up $1.42). The stock was trading at $92. The stock set a 52-week high of $95.61 on May 19 but it has been all downhill since up until now. BHP is the world’s largest miner and recently posted record profits of $15 billion on revenue of $60 billion for the quarter. However, it fell short of Wall Street’s estimates of nearly $16 billion. Although many now believe its bid for rival Rio Tinto (RTP, $388.60, up $10.01) may be in trouble, the stock may have bottomed. The October 70 calls (BHPJN, $4.50, up $0.60) and the January 80 calls (BHPAP, $3.90, up $0.80) were active today.

Alcoa (AA, $32.12, up $0.43). In a little over two months, Alcoa has dropped 10 points and is a stone’s throw from its 52-week low of $26.69. I don’t know if the sell-off in the stock is warranted but I do know that demand for steel hasn’t diminished totally. I’m still on the fence with Alcoa but the October 35 calls (AAJG, $1.25, up $0.11) were the most active in the October call chain.

Freeport-McMoRan (FCX, $93.66, up $2.57). This stock was at $117 and made it up to $127 before falling to a recent low of $75.81 on August 5. Since then, the recovery has been swift and fast. Take a look at the October 100 calls (FCXJT, $5.50, up $0.85) which jumped 18% today.

Southern Copper (PCU, $26.30, up $1.75) is another stock that we can add to our list. The stock has been taken down to attractive levels and we can play the bounce. The October 25 calls (PCUJE, $2.85, up $0.95) were up 50% today while the October 30 calls (PCUJF, $0.80, up $0.35) were up nearly 80%. Long-term bullish traders may also want to look at the January 30 calls (PCUAF, $1.60, up $0.45).

The market did well with oil going jumping over $5 today. The Dow ended the day with a 12 point gain and closed at 11,430, a 100 points higher off its lows. The Dow is 200+ points lower from where we started the week and I don’t think we will have a 200 point rally on Friday with all of the rhetoric going on right now. However, I do think it’s a good time to give copper another look.

Rick Rouse
Rick@OptionsMentoring.com

Oil prices are up $6 a barrel this morning, its highest level in over two weeks, as escalating tensions with Russia heat up. The price of oil is at $121 and change and could go higher if a disruption of supply to Western countries is forthcoming. As you know, I was in the camp of oil going back above $120 before it got to $100 but the turn has been on a dime causing a huge jump in gold.

Russia is outraged about a possible deal between Washington and Poland to install a missile defense system in Eastern Europe and those concerns took center stage today. The defense system is seen as a threat by Moscow and other factors such as Storm Fay, and a weaker dollar has added a lot of pressure on oil today.

People are waking up to the fact that this is a huge deal and the continued presence of Russian troops in Georgia could keep the fire burning for higher oil prices. Last Friday I mentioned the gold stocks with some January call options and was hoping to scale into a position as oil headed back up. However, these positions “gapped” up so the entry prices are a lot higher than they were. With the sell-off in gold many traders started taking positions last week and it certainly is paying off today. Here is a look at the action:

Barrick Gold (ABX, $36.39, up $2.68). The January 35 calls (ABXAG, $5.00, up $1.40) were at $3.10 on Friday.

Goldcorp (GG, $34.98, up $2.55). The January 32.50 calls (GGAZ, $6.00, up $1.50) were going for $3.30.

Gold Fields (GFI, $9.05, up $0.39). The January 10 calls (GFIAB, $1.10, up $0.25) were trading for 88 cents.

Newmont Mining (NEM, $45.01, up $1.76). The January 45 calls (NEMAI, $4.90, up $0.90) were profiled at $3.35.

If you got into these trades last Friday or earlier this week, protect your profits. No one could have predicted the $6 jump in oil this morning but the Goldman Sachs (GS, $154.55, down $3.70) call of oil at $150 is looking like a real possibility if the tensions with Russia don’t ease.

Rick Rouse
Rick@OptionsMentoring.com

The “timing is everything” quote couldn’t have had more meaning today with a few of our trades. The bears had thoughts on taking the financial sector lower until the bulls stepped in and took over. The earlier blog this morning couldn’t have come at a better time although it’s a little too early to tell if the trades will pay off big.

To start, there were a few trades I mentioned this morning involving Citigroup (C, $17.49, up $0.30), Lehman Brothers (LEH, $13.73, up $0.66) and Wachovia (WB, $14.90, up $0.60). All three stocks had a volatile session and were all over the map providing traders with plenty of good entry points.

The Citigroup January 20 calls (CAD, $1.52, up $0.03) traded as low as $1.30 and were a nickle off from our target entry price of $1.25. Some of you may have pulled the trigger at $1.30 which was close enough and are now looking at a 15% gain. You could set stops at your entry price if the volatility is too much for you to bear.

Trading Lehman Brothers could be like catching a falling knife, eventually, because the “bankruptcy” rumors are flying around this company like pigeons on a boardwalk. Lehman could be in serious trouble unless it sells some of its assets which is being considered. I said the January 20 calls (LYHAD, $1.80, up $0.25) were “mouth-watering” at $1.40 and low and behold, they were. The calls made a nice 30% gain by the end of the day. We are targeting the $2.00 level as an exit for a quick 40% profit and a stop of $1.60 gets you a 15% return.

Wachovia shares rebounded 6% from the morning blog after news broke that a private real estate company had bought some of the bank’s troubled land and construction loans. The January 15 calls (WBAC, $3.50, up $0.20) were trading for $3.00 and ended the day 17% higher than our entry price. The stock really got some legs after the news and was looking at busting through $15 before the final bell sounded. If the stock can back to the $17-$18 range over the next week or so, we could be looking at 50%+ returns.

And finally, there’s Yahoo (YHOO, $19.17, down $0.25) which continued lower throughout the rest of the day. The October 20 calls (YHQJD, $1.30, down $0.20) and the January 22.50 calls (YHQAX, $1.35, down $0.10) provided us good entry points today because…after the closing bell Yahoo announced an Internet-TV deal with Intel (INTC, $23.39, down $0.20) that will provide users a new and unique way of using the Internet.

The Widget Channel could be Yahoo’s wild card that saves the company’s stock. Intel’s chip, called Intel Media Processor 3100, will start appearing in televisions, set-top boxes and other television-connected gizmos as early as next year. Yahoo will then bring the Internet to TV by using bite-sized snippets, or widgets, rather than the whole Internet.

The technology sounds exciting although the news did not do much for Yahoo’s stock in after-hours trading. The shares are up only two cents but Yahoo should open higher on Thursday after the talking heads pump up the news.

Rick Rouse
Rick@OptionsMentoring.com

Harley-Davidson (HOG, $42.56, up $1.21) ended the week on a high note, closing at its high for the day on Friday. It’s a pretty good sign going into the weekend that investor demand is still strong. If the market hadn’t closed, the stock was on its way to $43. A couple of things are going right for Harley right now.

After hitting a bottom of $32.18 on 7/15, the stock is up 30% in a month. The company recently closed a deal for MV Agusta Group, an Italian motorcycle maker for a little over $100 million. Harley had been doing well in Europe anyway, experiencing double-digit growth over the past few years. The acquisition of MV Agusta Group will add a couple of lines of motorcycles to Harley-Davidson’s product mix, including a line of high-performance sport motorcycles.

Another positive sign was that the company had its credit raised by Standard & Poor’s Rating Services which removed Harley’s long-term corporate credit rating from CreditWatch. Harley was placed with a “negative outlook” back in April but now has back its “A” rating. However, the credit rating service also cited a weak motorcycle market and instability in the financial markets which could have an affect on the stock down the road.

The January 40 calls (HOGAH, $5.60, up $0.60) were trading at $4 and the January 50 calls (HOGAJ, $1.45, up $0.25) were trading at $1.15 in mid-June and are approaching 50% gains. The stock is going to run into strong resistance at $45 and if we start the fade, close the position. I’d like to get over $43 and closer to $44 before we bail but if the stock falters at least we will have a decent profit.

Rick Rouse
Rick@OptionsMentoring.com

Sonic (SONC, $16.70, up $0.13) continues to trade higher on no real news. The restaurant sector has done well over the past few weeks and Sonic has participated in the rally. Lower oil prices have helped fuel a recovery from some of the lows as many of these stocks got hammered after Wall Street released pessimistic views for the quarter.

Most restaurant companies have reported their financial results so we will see what happens from here. We will still get monthly updates on the sector when same-store sales are reported and let’s hope the trend continues. However, let’s protect our profits just in case they slip from here.

Sonic was a great buy at $14 on 6/30 and we got an early Christmas present with the December 17.50 calls (ZSQLW, $1.35, up $0.45) which were trading for 70 cents. They are now up nearly 100% from our entry price. The calls don’t expire until December 19 but go ahead and sell half of the position today and set a stop of $1.00 on the other half.

Rick Rouse
Rick@OptionsMentoring.com

Genentech (DNA, $98.12, up $0.29) has hit an all-time high this morning. Although we still haven’t heard from the company’s “special committee” that is evaluating the $44 billion bid from Roche, there’s a research note out this morning saying Genentech was worth $130 a share.

The analyst went on to say there was an 80% chance of Genentech getting a bid of $105 or higher while the other 20% says a deal falls through and the stock trades back to $86. That a pretty good way of breaking it down I suppose but I mentioned back in July the stock was worth $125.

On 7/22, I profiled the August 95 calls (DWNHS, $3.40, up $0.65) at $1.50 and the September 100 calls (DWNIT, $2.75, up $0.25) at $0.65. At the time I said the August calls were a little riskier because they only had three weeks until expiration but the stock could still trade higher. As I mentioned earlier, I didn’t think we would see another offer from Roche by the time the August 95 call options expire on Friday. They are now up well over 100% and stops should be set at $3.00 to ensure that 100% return. You can ride these calls until Friday but make sure you close them or they will get exercised because they are deep in-the-money.

The September 100 calls have literally been “money” for us. This trade is now up 250% and the calls are still out-of-the-money. In other words, if Genentech trades flat from here on out and doesn’t break $100 by September 19, the calls will be worth zero. The $2.75 is all expensive time premium and will slowly evaporate if Genentech stalls from here.

I don’t think that will happen but you never know. It would wise to set stops on the September calls at in the $2.00-$2.25 range. I’ve still got my fingers crossed for a higher bid although I don’t think one will come by Friday for the August 95 calls to benefit much more. The September 100 calls have the potential to explode if a bid of $105 comes. Then again, they already have exploded if you got them back in July. Stay tuned…

Rick Rouse
Rick@OptionsMentoring.com

Back in June, I mentioned shares of Harley-Davidson (HOG, $41.94, up $0.19) had been in a downtrend for 18 months, falling from a high of $75 to a low of $32.18 on 7/15. Two days later, the company announced earnings and since then the stock has been on a roll.

Harley-Davidson reported 2Q earnings of $223 million, or $0.95 a share, versus $291 million, or $1.14, last year. Wall Street had expected earnings of just $0.76 a share so the company beat by 19 cents. Revenue checked in at $1.6 billion or about $200 million higher than estimates.

With the stock at an eight-year low, the stock was beginning to look attractive and I said to wait for the company to report earnings before going long. Most of my assumptions turned up fairly accurate, the stock drifted lower, the weather warmed and gas prices continued to climb. It seems that people are buying Harley’s as a way to combat higher gas prices. Another reason I chose Harley was because there was no “pure-play” in the scooter industry that I liked and it has been apparent that two wheels are cheaper than four.

I said at the time, “usually it’s better to wait and see if a company’s products are back in demand before trying to time a bottom which I’m not quite sure if Harley has hit or not.” Well, Harley did hit its bottom and it was at $32. It would have been have been risky to buy a call option ahead of earnings but that bet would have paid off.

The January 40 calls (HOGAH, $5.20, unchanged) were trading at $4 and the January 50 calls (HOGAJ, $1.32, down $0.08) were trading at $1.15 in the 6/13 blog and they were a lot cheaper when Harley bottomed out. I said to wait for the stock to get above $42 before seriously considering any of these plays and here we are. I wouldn’t go crazy with this trade but one or two call options may be worth a gamble.

Rick Rouse
Rick@OptionsMentoring.com

Research In Motion (RIMM, $132.14, up $4.89) is having another huge day after touching a low of $116 on Monday. The move can be attributed to a positive note out of Citigroup saying the company is poised for a strong second half of the year with the introduction of the BlackBerry Bold.

On July 31 I mentioned the company’s other products, the Kickstart and the Thunder, will also be hitting the market. These catalysts have propelled the stock higher in the short-term and that was all were we looking for. I profiled the September 140 calls (RULIH, $5.00, up $1.45) at $1.85 and they are up another 40% today. Some of you were stopped out with only an 8% gain but other traders may have stayed in.

The calls are now up 150% from entry levels and with the weekend coming up it would be wise to maybe sell half of the position and set a stop on the other half. There will be a small loss of time premium but that would be offset if RIMM continues higher next week. As far as resistance, the stock is facing headwinds at $140 and it would be a stretch for RIMM to barrel through that and go on to test its 52-week high of $148.

Rick Rouse
Rick@OptionsMentoring.com

Sometimes a company just gets it. Despite the challenges companies have to raise shareholder value, McDonald’s (MCD, $64.23, up $2.37) is bending over backwards and doing cartwheels as we head into the Olympics. The timing couldn’t be any better.

The Beijing Olympics started today and it just so happened that McDonald’s reported their numbers for July same-store sales. Coincidence? Nah. The company reported a better-than-expected 6.7% increase in its U.S. stores and a 15.9% rise worldwide.

McDonald’s is a sponsor of the games and has done a good job of getting in the public’s eye at the right time. The world’s biggest hamburger chain could soon become the world’s largest chicken chain with its new chicken biscuit breakfast sandwich and its chicken sandwich, which by the way, rivals that of Chick-fil-A sandwich.

Last month, McDonald’s warned of higher beef and chicken costs but has managed those costs extremely well. The dollar menu continues to be a hit and more good things could be in store when the company rolls out specialty coffee beverages in more locations.

The last time I mentioned McDonald’s was on June 30 and at the time I didn’t see any option trades that I liked. I did, however, talk about Sonic (SONC, $15.69, up $0.41) which was trading at $14.42. Sonic was down nearly 50% from its 52-week high and I mentioned the strong support at $14.

McDonald’s was holding up well but I really felt Sonic was a good buy at those levels. The stock was a great buy at $14 but I also liked the December 17.50 calls (ZSQLW, $1.10, up $0.20) which were trading for 70 cents. They were a “lottery pick” but so far we are up over 50%. These calls will be worth at least $2.50 if Sonic can get back to $20 by December 19 but I wouldn’t have a problem if positions were closed here for a 50% profit.

Sonic is no McDonald’s but either way, we’re “lovin’ it”.

Rick Rouse
Rick@OptionsMentoring.com