Wells Fargo announced its intention to issue $10 Billion in new stock to help cover the cost of acquiring Wachovia. The Nov 33 Put options I purchased a couple weeks ago were for this purpose exactly. Wells had announced last month they would be seeking to raise up to $20 Billion and it was obvious that when the shares were issued, the stock would suffer from dilution and fall. I sold at 3 today and locked in a 56% profit on the trade.

I think there is a lot more downside potential in most of the national banks, despite all the government’s efforts to keep them propped up and solvent. Earnings are going to be down severely heading into 2009 and this creates a great opportunity for put traders to make money on big downswings when bad news is released.

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