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Annaly Capital Management, Inc. Message Board

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  • sid66tb sid66tb Nov 26, 2009 9:02 AM Flag

    66 billion in mortgatge backed securities?

    Agree. not a good stock to short, but you can get in cheaper by selling in the money puts. That way you get a premium now and control the buy price of the stock. For example, you can sell the Jan $17.50 puts for 63 cents...that makes your buy price under $17 after the commissions.

    look at jan 2011 15 puts...you can sell them for $2.55 right now....this is certainly a sign that the stock will go lower not higher by a year from now. I sold some Wed for $2.55 per share. The premium is almost as much as a years distributions and you get the stock for $3 less than current price.

    The dreamers who think this is going to $19.50 will be sorely disappointed.

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    • I agree with much of what you say. Not on the value of the stock, but on the idea of selling puts. Awhile back I sold a fair amount of april 2010 15, 16 and 17 strikes. I am looking right now and can tell you that the jan 2011 15s you claim to have sold at 2.55 haven't traded there for awhile. Yesterday only 13 traded in total and last traded at 2.05. The range was 2.05 to 2.15. Never did they trade recently at 2.55 though.
      In terms of what the price of an option may be telling you about people's expectations, your conclusion is actually not correct. Options pricing has a variety of inputs, among them are dividends. cost of money, strike, etc. If you look at the implied volatility on options that actually trade (so for instance not the april 13 strike) you'll see that the implied vol for the puts and the calls tends to be similar. It's only math, but it is important. If the puts were cheaper than the calls, you'd see a meaningful difference in the volatility numbers

 
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