A week ago, we scaled into a few positions in the financial stocks hoping for a quick rebound. In the 8/20 blog I talked about how some of the mid to major financial stocks were getting at their 52-week lows and we could play a quick bounce to the upside.

The danger with trading some of these stocks is that if those 52-week lows are broken they could head even lower. However, we have a pretty good grasp of what’s going on out in the market place and we can now turn our attention to taking some more profits off of the table.

We already closed the Lehman Brothers (LEH, $13.78, up $0.35) trade for a 70% profit in two days and like a tide that lifts all ships, today’s rally has taken our other positions into positive territory as we head to lunch and halfway through the trading session. Fannie Mae (FNM, $5.82, up $0.63) and Freddie Mac (FRE, $4.01, up $0.72) are having another big day, up 11% and 20%, respectively. Here’s our bounce so let’s take advantage of it.

The Fannie May January 5 calls (NJWAA, $3.20, up $0.50) were profiled at $2.40 and are up 33%. The Freddie Mac January 5 calls (FREAA, $1.35, up $0.35) were spotted at $1.20 and are up a little over 10%.

The other two trades we looked at involved Citigroup (C, $17.90, up $0.29) and Wachovia (WB, $14.12, up $0.20).

The Citigroup January 20 calls (CAD, $1.60, up $0.10) were at $1.37 and are showing about a 20% gain. The Wachovia January 15 calls (WBAC, $3.00, up $0.10) are trading exactly where they were profiled at.

How you manage your profits from here is up to you but they should all be closed before Friday regardless of where they are trading at. If you continue to see gains, great. But don’t press your luck with the long holiday weekend coming. The market never dances with the same partner and the risks are too great to expect much more from these plays.

Rick Rouse