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The model portfolio currently has 12 open positions with an average holding period of six weeks, which is the longest average holding period since its inception. I have made adjustments to many of these positions in order to take money off the table and reduce risk, and many of them have a high probability of realizing a profit.

And although I am by no means counting chickens before they're hatched, I feel comfortable this morning making two new trade suggestions that are more speculative and risky in nature.

The first is a bullish bet on biotech firm

Neurochem

(NRMX)

, and the second is a takeover play in

Alltel

(AT) - Get Report

.

Romancing Neurochem

Neurochem shares have declined some 50% to around $7 a share over the past five weeks. The company is expected to release phase III results for its experimental Alzheimer's drug, Alzhemed, sometime between now and the end of the quarter.

But the lack of a specific timetable and the company's recent offering of $80 million in convertible notes could be signs that the trial didn't go well, and the company needs more time and money to produce positive results, according to several recent analyst reports.

This negative view has the skeptics piling in, and as of April 16 short interest stood at 10% of the float (shares available to trade). Recent activity and analyst reports estimate that short interest has increased close to 20% as of last week.

The

implied volatility of Neurochem options jumped to the 150% level across several expiration periods (May, June and July), indicating the lack of clarity surrounding the release date and results for the trial.

However, I believe that much of the bad news is priced into the stock at current levels and that Neurochem has upside potential that would only be boosted by a short-squeeze. So I want to establish a position that has two parts: an

at-the-money call spread in June, and the outright purchase of some

out-of-the-money May

call options.

The Trades:

-- Buy to open 10 June $5 calls (KQMFA); and

-- Sell to open 10 June $10 calls (KQMFB), for a net

debit of $1.60 for the

call spread.

And

-- Buy to open 10 May $10 calls (KQMEB) for 10 cents per

contract.

This a limited-risk position in which the June spread can offer a 95% return if shares are above $10 before the June 15

expiration date. The May calls have the potential for unlimited near-term profits should positive news come out ahead of this Friday's expiration.

Calling on Alltel

Alltel is a wireless telecommunications company that's been performing well from a business and operational standpoint. But it is also being talked about as a takeover target. In this case, I believe there is some validity to the rumors, so I want to establish a position with upside potential.

The Trade:

-- Buy to open 5 June $70 calls (ATFN) at 60 cents per contract.

Be aware that this is a purely speculative position. Also, note that it will likely require shares of Alltel to trade down toward the $64.50 level for the order to be executed at the price limit.

Steven Smith writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He was a seatholding member of the Chicago Board of Trade (CBOT) and the Chicago Board Options Exchange (CBOE) from May 1989 to August 1995. During that six-year period, he traded multiple markets for his own personal account and acted as an executing broker for third-party accounts. He appreciates your feedback;

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