PUTS Time

I am ready to make my play on the PUT options. I am looking to buy the January 2006 PUTS on both Pulte and Wachovia. I am not sure if I will purchase both tomorrow, but I am looking at the following contracts:

Pulte:

.PHMMP - Pulte Homes, January 2006 Put Option with $47.50 strike price. Common closed at $42.55 and options was trading around $6.50. That means if held until January expiration the stock would need to be trading below $41 for me to make any money. The leverage is approximately 6-7 times. The cost is around 4%.

Wachovia:

.WBMJ - Wachovia, January 2006 Put Option with $50 strike price. Common closed at $47.84 and option was trading around $3.50. That means that if the contract were held until near expiration - the common would need to be lower than $46.50 for you to make any money on the trade. Considering that this trade generates greater than 10 times leverage for a cost of around 3-4% - I consider this very promising.

These trades are very interesting because they should work somewhat the opposite of the gold position. A rising interest rate environment and inverted yield curve should be very bearish for both Wachovia and Pulte whereas a falling rate environment would be very beneficial for them.

Although gold shares the same characteristics - you have to remember that I am LONG gold and potentially SHORT wachovia and pulte. Hopefully there will be some convergence among the higher quality assets (e.g. those with improving fundamentals ) - and you know which ones I mean there.

The other crucial consideration here is the time horizon. Pulte announces earnings on 10/26 and Wachovia announce on 10/17. That is approaching pretty quickly and I don't know if I want to stick around for the potential risk of positive earnings surprises. Who knows - we'll see what the play is tomorrow and how things are looking.

I am expecting some bigtime close of Q3 window dressing from the mutual fund studs - so we may see a 100+ up day on the Dow. That would give the perfect liquid entry point for the PUTS.

Hasta manana.

Regards,

BG