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  • jamesrutherford1980 jamesrutherford1980 Sep 10, 2009 9:35 AM Flag

    Gina re: NLY


    Greetings. In one of your messages you mentioned something about NLY. It has been very strong lately. Do you still own it? This isn't a real time disclosure but I decided to place a huge bet on it Tuesday in an effort to increase the size of the down payment for the house. It is kind of a bizzare trade, but seems pretty safe. Here's what I did. I bought a ton of NLY shares at about $17.50 and - get this - I sold the April 2010 $16 calls for $1.65. I know it sounds crazy because I got only a 15 cent premium over the $16 strike price. But here is my reasoning. NLY goes ex dividend in about three weeks. There is a very good chance that my entire position will get assigned the day before ex div. Since I sold 332 contracts of the calls, this means I will make close to $5,000 in profit in three weeks if the shares do get assigned. If they don't get assigned, then I will still be holding the 33,200 shares and will collect a dividend of at least 60 cents per share in about 7 weeks, i.e. close to $20k, while the shares remain frozen at the $16 strike until we see what occurs up to or at the following dividend cycle in January. With NLY closing at $17.91 yesterday, $5k in 3 weeks or $20k in 7 weeks or something in between seems almost a lock. The only risk is a major meltdown in NLY stock below the $16 strike. I estimate that risk to be less than 5% in the next few months. The REIT sector is very strong right now, and NLY is a very well managed company.


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