And now what could become history's biggest transfer of tax dollars to bail out bad lending begins. Last month Congress passed a bill that gave the Treasury Department $800 billion to bail out Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). And while it is unclear how much money will be used to bail them out, the general outlines of the soon-to-be-announced terms are becoming clearer than they were last night.

The New York Times and The Washington Post report on five key features as follows:

• Government bankruptcy. Fannie and Freddie will be taken under a conservatorship -- which is similar to a bankruptcy wherein a trustee operates the company so it can be fixed and ultimately sold back to public investors. The bailout would reduce the value of their common and preferred shares "to little or nothing," according to the Times.
• Taxpayers bailout defaulted mortgages. Some share of the $800 billion in taxpayer funds will be used to pay "any losses on mortgages [Fannie and Freddie] own or guarantee," according to the Times.
• Payouts on a quarterly basis depending on reported results. Treasury is trying to dribble the bailout over time. "Instead of giving each company a big capital infusion up front, the government could make quarterly injections as the companies' losses warrant. This would be an attempt to minimize the initial cost of the rescue," according to the Washington Post.

• On 10/1 Citigroup announced that mortgage-backed securities, credit markets and deterioration in the consumer credit environment are expected to have an adverse impact on third quarter financial results.
• C is recently up 86 cents to $47.99.
• C October option implied volatility is at 25, November is at 24, above its 26-week average of 22 according to Track Data, suggesting larger risk.

• HAS is recently trading at $29.63.
• BMO Capital Marketes rates HAS at Underperform with a $26 price target.
• HAS November option implied volatility of 32 is above its 26-week average of 27 according to Track Data, suggesting slightly more risk.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.