After a strong start, the market fizzled and ended the day with the short end of the stick. The Dow managed to trade as high as 7,400 before finishing the session down 7 points to close at 7,216. The Nasdaq took the hardest hit as it fell 27 points and settled at 1,404 while the S&P 500 finished at 753, down 3 points.

The financial stocks were up 6.0% early in the AM which helped the market’s run, but the bears came out to play late in the day as the bulls fled the financial stocks which ruined the momentum. As a result, the financial stocks finished the session with a 2% loss. How’s that for an 8% swing?

IBM (IBM, $91.22, up $0.86) also gave back its gains after hitting a brick wall at $93. The stock still managed to end the session positive which was a good sign but I mentioned that I was in the April 100 calls (IBMDT, $1.00 up $0.05) at $1.08. I got in this position at 10AM and by 1PM the calls were at $1.39. I had said that I was only looking for a $250 profit and I got that. However, in a split second (literally) those calls dropped from $1.39 to $1.25 and I went from a $310 profit to a $170 profit.

It was a mistake on my part in a way because I did not set a stop once I reached my initial target. As much as I preach about stops and exit points this is no excuse although I don’t think I would have had time to place the order. I went from $270 to $310 down to $170 in about six minutes but still…

The IBM April 95 calls (IBMDS, $2.45, up $0.20) traded to a high of $3.20 and I had said in the morning blog that you could roll the trade over or take profits. At the time, the 95’s were trading for $2.65 so there was a chance to make another 50 cents. After that, it was a no-brainer to close the trade. At $3.00, the return for the trade was 150%. I just hope the 100’s can get bounce back this week. If not, set stops at 75 cents to protect the profits from the April 95 call option trade.

The point I’m trying to make is that we are in a fast moving market where profits and losses can happen in minutes, if not seconds, and we can’t take anything for granted. I am still bullish for the week as I pointed out in last night’s Weekly Wrap so I’m not too upset with the IBM trade. I’m keeping an updated profile on this trade because I added it to the option portfolio I am working on for the blog. My goal is to show you how to turn a little bit of money into a lot of money.

Elsewhere, Intel (INTC, $14.25, down $0.45) slipped 3% after accusing Advanced Micro Devices (AMD, $2.48, down $0.04) of breaching a cross-licensing agreement. The market kinda shrugged off the news as Intel traded higher to start the session but with the litigation news the trade I had mentioned with the April 15 calls (NQDC, $0.55, down $0.20) becomes cloudy.

The call options opened at 80 cents but we never buy at the open. If you had waited 30 minutes, the calls started to get cheaper. If you are in the trade put stops on at 40 cents. Intel is threatening to end the arrangement with AMD within 60 days unless the alleged breach is corrected.

One bright spot from today was our position in Bank of America (BAC, $5.76, down $0.09) got fatter. The May 6 calls (BYOEF, $1.60, up $0.10) were entered at 75 cents on 3/11/09 and traded as high as $2.10. Profits could’ve been taken at $2.00. The July 10 calls (JLWGB, $0.58, up $0.07) traded as high as 73 cents and our exit target was 60 cents. These also could have been closed for a 100% return.

I know it’s tough to take profits because they look so good and they act like they want to keep going up. Just be careful not to give back all of your profits with this one. The financial stocks can go down just as fast as they went up as we witnessed today.

Rick Rouse