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Annaly Capital Management, Inc. Message Board

  • dunkyj24 dunkyj24 Nov 10, 2013 12:57 AM Flag

    mREITS: The Time Is Now To Buy

    SA article from Nov 8th.

    Sentiment: Hold

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    • Thanks for the notification.

      "I believe that they are near the bottom. I'm not saying that they are at the bottom and there is no downside risk. I'm merely speculating that the downside risk is limited and the upside risk is better looking at these long term."

      Playing off that i looked at the january 10 puts. 29 cents bid, 30 cents asked. Meaning if the divi is your biggest goal you can sell the january 10's, get 29 cents apiece now, and not have to buy the stock unless it gets down to 10 or lower.

      The downside risks in doing it that way are,

      1) you really want the stock, don't get it, and it goes up. You only get the 29 cents premium profit

      2) you've got the puts out against you. If bad news comes along and takes it well below 10 you're gonna have to buy the puts back at a loss or pay 10 bucks for the stock.

      To balance the 2nd out though, you buy the stock now at let's say 10.65, that bad news does come along and takes the stock down. You're not losing until 10 is breached on the puts. If you'd bought the stock above 10 you'd start losing right away. In fact, you're making money until the stock falls below 9.71. I.e., you should wind up losing less selling puts rather than buying the stock. If any theoretical bad news comes out after the divi though and not before it, and you haven't got the stock in your bag, you wouldn't get the benefit of the divi offset. That may be a 50/50 gamble though and the worst you would do in that case is something just about even, the premium collected vs the divi lost.

      If bad news comes out before ex-divi and the stock gets down to 10..., heck, it's too late for my mind to play these games, and too late to read the comments following the piece. If you're interested you guys can work it out for yourselves. There are a few things that could happen at that level, some that might or not happen, some that probably wouldn't happen if/until the stock goes lower.

10.23+0.05(+0.49%)Oct 7 4:01 PMEDT