12:45 pm

Research In Motion (RIMM, $49.28, up $3.66) is nearing $50 and oh what a trade it has been for the April 60 calls (RFYDL, $0.58, up $0.36). I mentioned them last night and again this morning and they have been a windall for those of you brave enough to swim with the sharks.

The April 60’s opened this morning at 34 cents and dipped to 30 cents and have now nearly doubled just three hours later. If you had bought just 20 contracts this morning it would have cost $600-$650. You are now looking at profits of nearly $700.

I’m on record this morning as saying the stock trades higher today and then sells-off. That really doesn’t matter anymore because the smart money has been made. If you are up 100% before an earnings announcement why risk the profits?

The straddle trade has favored the calls today. The April 50 calls (RFYDJ, $3.25, up $1.65) are up 100% while the April 40 puts (RUPPH, $0.68, down $0.58) are down 50%. What is funny is that I’ve been saying that we may not get a 20% move after the company announces earnings but we have gotten a 20% move from Monday’s low to today’s highs. Go figure.

Anyway, if you entered the straddle trade with a total price tag of $320 or $285, you are profitable. The total profits you would receive if you sold both options now would be near $400. You would get $325 for the call and $65-$70 for the put. I was figuring a 10% gain from the trade but it has returned 25%. You could close the calls and be even and let the puts ride for a possible huge return but once again, safe money always wins.

RIMM could bust $50 but I wanted to show you how to protect profits and what the risks are.

Rick Rouse

Note: Is everybody digging the “time” post? You can always click on the title of the blog you are reading to see what time it was posted but I think it may be an hour off due to the recent time change. If you can think of any others ideas, shoot me an email.