Johnson & Johnson (JNJ, $71.13, up $0.68) is setting a new 52-week high today and has been solid since its earnings report. I mentioned good things could be in store for the company and the chance of the stock setting new 52-week highs was a good possibility if earnings were better-than-expected. We were stopped out of the August 65 calls (JNJHM, $6.20, up $0.70) at $3.80 on July 30 after staying in the trade for a couple of weeks because of the volatility. The trade was profiled at $2.30 so the return was 65%. As you can see, although we were stopped out, the calls went on to gain another 50%.

Research In Motion (RIMM, $126.58, up $4.60) is another position that we were whipsawed out of due to the market volatility. I profiled the September 140 calls (RULIH, $3.35, up $1.33) at $1.85 on July 31 and they immediately traded to a high of $2.70 shortly after. We then set a $2.00 stop which took us out of the trade as RIMM plunged below $116 Monday. Although the trade was good for 8% today’s action proves how nimble we have to be to maximize our profits. That’s the difference between 8% and nearly a 100% return. Incredible huh?

Rick Rouse
Rick@OptionsMentoring.com

Wachovia (WB, $18.32, up $1.20) is the top performer among financial stocks today as we get closer to the Federal Reserve meeting to decide U.S. interest rates. The company’s CEO went on record saying that Wachovia would not need to raise anymore capital and that management changes are done for the time being.

Shares of Wachovia gained 7% at the open and have traded as high as $18.54. On July 30, we picked up some of the January 20 calls (WBAD, $3.30, up $0.40) at $2.25. We are approaching a 50% gain ahead of the Fed meeting so I wouldn’t blame any of you for taking profits ahead of such a volatile event. We moved to the January 20 calls after riding the January 15 calls (WBAC, $6.20, up $0.80) for a 100% profit. They were originally profiled at $1.30 on July 17 and continue to do well.

Citigroup (C, $19.51, up $0.67) is trying to get back over $20 again. The January 20 calls (CAD, $2.50, up $0.22) were profiled at $2.30 and are a work-in-progress. I say that because we are experiencing gains or losses of about 10% on any given day. These same calls were originally profiled at $1.25 and were sold at $2.60 the first time around. The January 22.50 calls (CAA, $1.50, up $0.15) were also mentioned on the 30th at $1.42.

And finally, when I wrote “I still don’t trust Merrill Lynch as a company”, that should have been a warning sign for myself. The first time around with Merrill Lynch (MER, $27.55, up $1.16) we made a 50% profit buying the January 35 calls (MERAG, $1.50, unchanged). They were first profiled at $1.90 and we exited them in the $2.65-$2.75 range. This time around we got in at $2.00 so we are currently looking at a 25% loss. These calls can get back above $2.00 or higher if Merrill makes a push at $30. In any event, set a stop loss at $1.00 just in case.

Overall, all three positions together would be producing a decent profit in less than a week. If we can get a continued rally after the Fed meeting in the financials, the profits will get even better.

Rick Rouse
Rick@OptionsMentoring.com

The market went on another wild ride Monday with the Dow posting a triple-digit loss to start the session. The financials were once again an area of concern as many of them traded lower for the day. The market staged an afternoon comeback when oil suddenly dropped $4 a barrel and briefly traded below $120. News that tropical storm Edouard would not mount a serious threat to the oil and natural gas facilities in the Gulf of Mexico was seen as a relief and the fact that Obama was talking about a plan for the U.S. to lessen our reliance on imported oil within 10 years served as two key components to the decline in oil.

The gyration of the market took us out of a couple of trades and both were profitable. Research In Motion (RIMM, $116.43, down $3.72) opened the morning slightly higher but it was all downhill after that, literally. The stock fell below $118 in the last hour of trading and like Apollo Creed, the only thing that saved it was the closing bell. We got into the September 140 calls (RULIH, $1.50, down $0.50) at $1.85 and they immediately jumped up to $2.70. We then set a $2.00 stop which was actually hit on Friday. The trade was good for 8% but let’s see what the Fed does before going long again.

Qualcomm (QCOM, $52.87, down $2.60) lost its chief operating officer, Sanjay Jha, who is leaving the company to become the head of Motorola’s handset division. The 5% drop in the stock tells you what this dude meant to Qualcomm and was a big score for Motorola. The October 50 calls (AAOJJ, $5.25, down $1.30) closed at $6.55 on Friday and opened at $6.25. We got into the position at $2.05 and set a stop at $6.15 which was hit on Qualcomm’s way down. The trade netted us a 200% return.

We are setting up for an exciting week with the Fed announcment on Tuesday and corporate earnings still coming in. Cisco Systems ($21.99, unchanged), News Corp. (NWS, $14.57, up $0.17) and Procter & Gamble (PG, $65.82, up $0.87) report earnings on Tuesday.

Rick Rouse
Rick@OptionsMentoring.com

ImClone Systems (IMCL, $64.59, down $0.75) has responded to Bristol-Myers Squibb (BMY, $21.49, up $0.38) offer for a buyout of $4.9 billion and has said the bid is too low. The company said it is evaluating the deal, but has stated that it already feels it’s too low. The story gets interesting from here.

ImClone also stated that it has been considering splitting its Erbitux business into a separate business from the rest of its pipeline and is investigating whether Bristol-Myers Squibb had access to that information. There’s a growing concern, especially with Carl Icahn, that one of the board members who serves on both companies maybe have leaked this information out which means Bristol-Myers might have had access to confidential information.

ImClone didn’t name the board member but it’s not that hard to figure out. I’m not sure where this will go because tongues do like to waggle but one of the reasons ImClone wants to separate the business is because one of the drugs in it’s pipeline could have a “significant competitive effect” on Erbitux. If ImClone split, Bristol-Myers Squibb may not have any rights to market that drug.

ImClone’s went on to say that the company’s pipeline “may be extremely valuable and significantly increase stockholder value as a separate business.” Those sentiments echo that of Carl Icahn who, in case you didn’t know, controls publicly traded Icahn Enterprises LP (IEP, $64.20, down $0.55).

We closed half of the ImClone August 45 calls (QCIHI, $19.20, down $0.20) at $19.00 on Friday and they are still holding up well. Go ahead and set stops at $18.00 for the other half. These calls were profiled at $2.40 and may have a little more room to run with the response from ImClone that the offer is too low. However, the timing will be important because the calls will expire in a couple of weeks. A high offer may come but if it doesn’t come right away, the stop will protect our monster profits.

Rick Rouse
Rick@OptionsMentoring.com

Research In Motion (RIMM, $122.82, up $3.60) was just what the doctor ordered. The stock opened Thursday’s trading session at $119.69 and the September 140 calls (RULIH, $2.75, up $0.90) opened at $1.85. The opening allowed us to get in the calls immediately as we had a limit order to buy them up to $2.00-$2.10.

RIMM was strong all day despite a nasty day for the market. The Dow has a miserable day, falling 200 points to close at 11,378. RIMM’s strength could be contributed to the Nasdaq which posted only a four point loss and finished at 2,325.

Another contributing factor was the surprise earnings report out of Motorola (MOT, $8.64, up $0.96). The company posted a profit of $4 million in income which amounted to break-even on a per-share basis. The Street had expected the company to report a loss of $66 million, or $0.03 a share.

Friday will be a HUGE day for the market as the unemployment numbers roll in before the market opens. If we can get a decent report, the RIMM call options and the other call positions we have should continue to do well. The RIMM trade is already up 50% and we can go ahead and set an early stop of $2.00 which gives us at least an 8% profit should the stock retreat.

Rick Rouse
Rick@OptionsMentoring.com

Talk about waking up to good news. There’s no better feeling as an option trader then to start you day off by learning that one of your option plays is up 700% for the day. No that is not a typo. But that is exactly what is happening today as word hit Wall Street that Bristol-Myers Squibb (BMY, $21.17, down $0.34) has made a $4.9 billion bid to purchase ImClone Systems (IMCL, $63.85, up $17.41).

The proposed deal is worth $60 a share and represents about a 30% premium from where Imclone last closed. We made a Biotech Watch List Sunday night and I updated a few of them last night. However, today’s news is so much better. If you’ll notice, Imclone’s stock price is above the $60 offer which could indicate an even higher bid may be needed.

Bristol-Myers Squibb already owns a 17% stake in ImClone and the two companies have been partners since September 2001 in developing Erbitux. Bristol-Myers has felt an “urgency” to do something after its industry-leading cancer treatment Taxol was overtaken by numerous generics brands. The pitch for ImClone was a way for Bristol-Myers to beef up its pipeline not only with Erbitux but other exciting drugs as well. Erbitux is amphibious in way because it treats “land or water”. The drug is approved for treating advanced colorectal cancer and head and neck cancers. And more uses for the drug could be on the way.

And wouldn’t you know it. Our buddy Carl Icahn just made a fortune on this news. Gotta give the dude credit though. He has been investing in ImClone since 1999 and owns nearly 14% of the company’s stock. He took over the board after the infamous securities scandal that I told you about Sunday night involving Martha Stewart.

But here’s the best part of this story. I told you the August 45 calls (QCIHI, $18.87, up $16.52) would be worth $5.00 if ImClone can hit $50 by August 15. I profiled these calls at $2.40 and on Monday they were actually cheaper as ImClone’s stock fell $1.27 by the end of the day. A 10 contract investment of about $2,500 is now worth a stunning $18,500 in just four days. Wow. Now you can see why the option market is one of the single biggest ways to make money in this world. Of course I had no way of knowing that a buyout offer was in the cards for ImClone but the action in the Biotech sector has been noticable.

Another company I talked about was Amylin Pharmaceuticals (AMLN, $31.07, up $3.59) which I said could be headed back above $30 despite reporting a wider-than-expected quarterly loss. Amylin is up on the ImClone news obviously. This has helped the August 30 calls (AQMHF, $2.00, up $1.50) which were profiled at $1.35. The calls were taking a big hit and looked as though they may expire worthless but today’s move took care of that. I would sell the entire position today and book profits.

As far as ImClone, it should be easy to manage stops from here. We can hold out for a higher premium but set stops at $16.00. The calls have a $15 premium built-in based on the buyout offer of $60 and they expire in a couple of weeks. Either way, I’d say we are in good shape.

Rick Rouse
Rick@OptionsMentoring.com

It’s been a month since we’ve really looked at Research In Motion (RIMM, $119.22, up $3.16) but it looks as though the stock could be headed on the way back up. The stock got hammered after the company missed Wall Street’s estimates by a penny but after testing the $100 level, traders seem to be warming up to the company again.

The sell-off in RIMM may have been a little too much but let’s step back and review what happened. When the company missed earnings, yeah, they missed by a penny, 84 cents versus expectations of 85 cents. Revenue was off $30 million, $2.24 billion versus $2.27 billion. And they lowered their outlook. The number that was really “overlooked” by Wall Street was that revenues grew 20% and their earnings miss was due to slightly higher expenses and a slight decline in gross margins (-0.4%). That slight “point four” decline is from a gross margin of 51.8%. Not too many companies out there can claim gross margins of 50%.

We did a strangle trade on RIMM before they announced earnings. I had factored in a huge move in the stock price but was unsure of the direction. The strangle trade provided us a safety net in either direction but the move in the stock had to be 15%-20%. Which is exactly what we got when the stock dropped 20 bucks after the announcement. The trade was good for a 10% return and it was only a one-day gig.

What would have happened if RIMM had exceeded expectations? The stock was in the $140’s before the earnings miss and if RIMM would have beat expectations then maybe it would have traded higher. There were a lot of negatives Wall Street gave the company with their earnings but when you step back and look at the big picture, now may be the best time to get into a trade.

The company has a slew of new devices coming to the market and one of them is right around the corner. When RIMM announced earnings it also said at the time that the BlackBerry Bold would be delayed from late July to early August. Well, August will be here Friday. Other smartphones coming to market are the Kickstart and the Thunder. The Thunder is expected to give Apple’s (AAPL, $159.88, up $2.80) iPhone a run for its money.

The bulls seem to be rallying the troops for another run to $150 ahead of the release of these products. The good thing here is there will not be an earnings announcement anytime soon. The only news that will be coming out of the company should be good news about their upcoming products. I say “should be” because you always have to prepare for anything.

I’m not recommending a strangle trade this time around, instead I’m going with the September 140 calls (RULIH, $1.80, up $0.53). If by chance RIMM opens higher this morning, wait 30 minutes after the opening bell to go long. I would buy them up to $2.00-$2.10. The August option contracts expire in 16 days so this is why I’m going into September. We will target the $3.00 area as our first exit point but we have to get there first. I’m going to set a “mental” stop loss at $1.00 for RIMM due to the volatility but its not a hard stop loss. Let’s give the trade time to develope and go from there.

Rick Rouse
Rick@OptionsMentoring.com

We were stopped out of the Johnson & Johnson (JNJ, $68.08, down $0.40) August 65 calls (JNJHM, $3.20, down $0.30) at $3.80 on Tuesday. J&J has failed to rally with the market but the calls were profiled at $2.30 so our return was 65%.

Biogen Idec (BIIB, $71.27, up $0.77) has traded higher the past two days and has pushed through $70. The August 70 calls (IHDHN, $2.85, up $0.45) are now in-the-money by $1.27 and they were profiled at $2.30. As you can see, there is some time premium still built into the calls but let’s go ahead and set stops at $2.50 which gives us about a 10% gain should the stock stall.

Qualcomm (QCOM, $55.64, up $0.72) set a new 52-week high on Wednesday. After starting the week lower, Qualcomm has also put in a solid two days. The October 50 calls (AAOJJ, $7.15, up $0.35) are now up a whopping 250% from an entry price of $2.05 well in-the-money. Let’s set stops at $6.15 which guarantees a 200% profit.

Rick Rouse
Rick@Optionsmentoring.com

The Financial stocks look like they may be setting up for another run higher. The sentiment for these stocks can change daily but the recent developments with Merrill Lynch (MER, $27.13, up $0.88) may actually be a good things. Merrill has been raising capital and selling troubled investments which will greatly reduce risk to the company moving forward. Other banks may follow suit.

News this morning that the Federal Reserve is going to extend its emergency borrowing program for investment banks could also lead to a small rally. The program will also be available to commercial banks as well and will allow bids on cash loans that last for 84 days, along with the 28-day loans that are now available. The previous plan was set to expire in September but has now been extended through January 30, 2009.

I had profiled a few longer-term call options a couple of weeks ago and we were able to ride most of them for average gains of 50% in less than a week. I’m going with the same plays again although our holding period may be longer. The market could be setting up for another rally and Friday’s unemployment report will have a huge impact on the market. If all is well, we could be starting August with some sort of rally.

I still don’t trust Merrill Lynch as a company so we will see. The January 35 calls (MERAG, $2.00, up $0.20) were first profiled at $1.90 and we exited them in the $2.65-$2.75 range. Some of you may have gotten out at even higher prices as the calls hit a high of $3.35. I like entry points here at these levels as this could be a “trading bottom” for Merrill Lynch.

Citigroup (C, $18.87, up $0.42) has traded as high as $19.50 this morning but many of the financials popped at the open. The January 20 calls (CAD, $2.30, up $0.27) were originally profiled at $1.25 and were sold at $2.60 the first time around. I like them again even at current prices. The January 22.50 calls (CAA, $1.42, up $0.19) can also be considered.

Wachovia (WB, $16.85, up $1.15) is the first bank I think will eventually get bought and maybe a bid from Goldman Sachs (GS, $183.74, up $2.11) will surface down the road. The January 15 calls (WBAC, $4.70, up $0.60) were first mentioned at $1.30 and $2.60 was our exit point. The stock went on a wild ride the day it announced earnings, trading lower before skyrocketing higher. These calls are much higher than our original entry price so we are going to move to the January 20 calls (WBAD, $2.25, up $0.25).

The average cost to buy one contract for any of these plays is around $200. They are all still considered “lottery plays” but I’d rather be picking on where their stock prices will be in six months instead of trying to pick a 3-digit number for a daily draw.

Rick Rouse
Rick@OptionsMentoring.com

It was a week of good news for Qualcomm (QCOM, $54.45, up $2.02) as the company reported earnings that were slightly ahead of Wall Street’s expectations. The icing on the cake was the fact that the company also settled its ongoing lawsuit against Nokia (NOK, $28.13, up $0.84).

The company had delayed its earnings announcement at the last minute on Wednesday and was suppose to report after the market closed. Once the delay came, speculation was in full-force until the Nokia deal was announced. As far as earnings, Qualcomm reported revenue of $2.8 billion and $0.55 a share. Wall Street had expected $2.71 billion and 55 cents. Qualcomm raised guidance in June and they were right on target. The earnings report alone may have lifted the stock on Thursday but it was the Noka news that sent the stock soaring.

Under the terms of the agreement, Nokia basically has a 15-year license to all of Qualcomm’s patents for use in Nokia’s infrastructure equipment. Nokia has also agreed not to use any of its patents directly against Qualcomm which paves the way for Qualcomm to integrate Nokia’s technology into its chipsets that are used in wireless phones.

It was a huge win/win for both companies but Qualcomm was the biggest winner. The rumor mill is already churning that Nokia could be using Qualcomm chips down the road. The old saying, “if you can’t beat ‘em, join ‘em”, would seem to fit Nokia if that were to happen and it looks like things could be headed that way.

On July 2, we made up a Telecom Watch List and Qualcomm was by far the best one on the list and the only one I liked. At the time, I mentioned the stock was setting new 52-week highs in mid-June and was the best positioned to take advantage of the surging demand for smart-phones. Apple (AAPL, $162.12, up $3.09) and Research in Motion (RIMM, $117.43, up $2.88) may be leading the charge when it comes to smart-phones but Qualcomm and its recent stock gains are clearly in the lead over the past month.

The rally in Qualcomm has put the October 50 calls (AAOJJ, $6.55, up $1.25) I mentioned at $2.05 well in-the-money. They are now up over 200% and I told you then that they could be a steal four months from now. Well, it only took a month and hopefully Qualcomm can continue its momentum a little while longer. The stock could be setting up for a run to $60 and getting off to a good start today would second that notion.

Side Note: I also mentioned AT&T (T, $31.40, down $0.30) on July 2 when it was trading at $33. I didn’t like it for a call option trade at the time because the stock was hitting 52-week lows. Guess what. It still is. We were watching the October 35 calls (TJG, $0.50, down $0.10) and I said if they got below a $1.00 then we would look at them again. Well, we’re looking at them again and I still don’t like a trade.

By waiting a month and noticing AT&T was in a downtrend, we just bought ourselves two more months of time premium. The January 35 calls (TAG, $1.13, down $0.11) are now approaching our old entry price on the October 35 calls of $1.00. However, I’m not ready to swim with the sharks just yet and it may be longer then expected for AT&T to rebound. The stock has been getting hit with a slew of downgrades and its latest earnings showed some serious weakness in their wireline business. That means AT&T is losing customers and they could be losing them at an accelerated pace. Hold off until further notice.

Rick Rouse
Rick@OptionsMentoring.com