We bought some more cheapie puts in Citi yesterday off a stingy bid that was filled when the stock grew frisky around mid-day. Inspired by a promotional message that I received recently from a brassy competitor, it would be tempting for me to tout annualized gains so far of 9000%, since the puts closed 0.10 above our 0.45 purchase price. But you know better – know that, in fact, the gain when translated to dollars would barely pay our round-turn commissions. Moreover, who knows what Citi will do next? The stock’s daily chart doesn’t look too bad, actually, with stochastic indicators that have been rounding up from oversold extremes for the last week or so.

So why did we elect to get in deeper? Pure speculation, is why. Even though the short-term outlook for Citi and many other stocks looks to me like a coin toss from here, it's prudent to own puts on something when the markets are as jittery as they’ve been lately. Investors seem less nervous about the possible economic damage wrought by Katrina than about the failure so far of stocks and bonds to acknowledge the damage in some telling way. Both of these asset classes have been skittering around like headless chickens for the last few days, suggesting that Wall Street is thus far unable to assess the economic impact of a storm that could turn out to be the most destructive in U.S. history.

Of course, the shares of Beazer, Horton and other homebuilders are having little trouble sorting things out, leaping for joy as they did yesterday -- and even holding onto their gains. But as bellwethers these stocks are probably best ignored, driven as they are now by an impulse whose roots lies perhaps beyond human understanding. Citi is easier to figure, since it has been sinking more or less predictably for the last sixteen months. In any event, we are not rooting for our Citi puts to become instant doublers -- just modest placeholders that will allow us to short other puts against them on weakness. We are not betting with the house, not quite, but neither are we pigeons splitting sixes at the blackjack table.