Lehman Brothers, the fourth-largest U.S. securities firm, reduced its mortgage holdings in the second quarter by 20% to curb further losses from the credit-market collapse.

Lehman reported a loss of $2.8 billion, or $5.14 per share, in line with preliminary figures the company released last week. Leveraged buyout loans were cut 37% to $18 billion.

Oil prices have resumed their northward climb. And inflation has returned to the American lexicon for the first time in decades. For U.S. consumers, there’s no way to dodge the financial fallout of that economic one-two punch.

Shorting the stock doesn’t seem all that attractive an option here. If Lehman proves that their assurances actually have some merit, the stock could snap right back to the 40-45 level. Instead, we want to take advantage of the monstrous volatility that has been priced into the near-dated options...

Wall Street rallied Tuesday, the first day of the second quarter, on news that two banks slammed by the credit crisis are working to raise cash and that U.S. manufacturing is faring better than expected. The Dow Jones industrial average soared more than 220 points.

This morning, we’re following up on three bonus trades that we’ve posted recently.

Our Energy ETF (XLE) trade, published on Tuesday, has worked out beautifully so far, so let’s start there! XLE fell $2.09 today, or 2.74%. We published three different ways to trade options on this ETF, and all of them have worked out nicely:

Is it time to get back into financials? Let's look at 4 charts and see.