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]]>