Celgene (CELG, $38.30, down $6.10) is down 14% this morning after offering a disappointing outlook on earnings to Wall Street. The company said first-quarter and 2009 earnings and revenue would miss expectations due to weaker sales of its drug Thalomid. This is no April Fool’s joke, bubba.

For those of you who don’t follow the Drug/ Pharma sector, Celgene is considered a gem and today the stock went on sale for a lot of bulls. I won’t get into all of the reasons on why the bulls love this company because there are a couple of trades I’m looking at right now.

The April 40 calls (LGHDH, $1.20, down $4.20) have lost nearly 80% of their value on the news as they are now out-of-the-money. Sharks are in the water and people are freaking out and dumping shares. These calls would be a little risky to buy here at these levels but they could bounce today.

If you buy 10 contracts at higher or lower prices make sure the stock is rebounding. I can’t really gives entry and exit targets on this one but these are the trading opportunities I look for when doing a “day trade”. If the April 40’s trade as low as $1.00, you could buy 10 contracts and sell them at $1.20. Just know if you get in at $1.00, they could go to 80 cents…

Having said that, I can give better entry and exit points for the May call options.

The May 40 calls (LQHEH, $2.55, down $4.25) are currently down over 60% and I like half positions here at these prices. Try to use a limit price of $2.25-$2.50. If they continue lower, we may buy the other half later. So if you normally buy 20 contracts when trading options, buy 10 to start. The Dow was down 100 points to start the session but we have turned positive shortly after an hour of trading.

Rick Rouse