I just got a bit "over" concerned over this foreclosure crisis. I realise that it probably doesn't mean a hill of beans, but I was watching AGNC drop. I made something like 43% on my calls and 8% on my shares since the drop back to $26. I am sure I will get another look at the options and shares again, but I just didn't want to risk my profits. I thought about purchasing some puts for downside protection or a stop loss order, but then again, I have seen the price fall through the stop loss and I didn't want to put on a limit that couldn't be fulfilled.
While we can all appreciate that the foreclosures should not impact the mortgage reits, I listened to Representative Waters on CNBC (and I am sure none of you would have enjoyed what she was saying) and the crises has reached a pretty intense level of rhetoric. I just don't know what to expect out of this administration, and I really believe that instead of welfare they are considering mortgagefare to buy some votes. They still apparently have some power to modify loans, although I am unclear as to the mechanism or what might be affected. Anyway, I suppose we have a great stock with some poor indirectly related headlines. Meanwhile, NLY is moving up thanks to our Cramer, while his comments may not have helped AGNC.
I can put my capital to work in a few other areas in the MLP space, as I await this issue to settle down.
I can't quite work out why AGNC worked itself down to $28.85, but one more drop, and it would have mean't a lot of profits.
So, I'll be waiting, and I might just jump back in tomorrow or later today if the price drops enough. In any event, we all know the pattern. This stock will drop after earnings. If it doesn't I'll just jump back on. I was really hoping to see $28.50, but that is a bit rich this early.
I think you guys know me enough to realise I am conservative, but closing out the positions in the MREIT space plus the profits from the puts has made this month very good.
I am not sure what to mark.
Good luck to all!
Thanks for the timely and detailed reply - I'm sorry I didn't express myself better. What I should have said was that Scottrade charges a flat $15 fee for an options trade - 1 contract or a 1000, then $1 for each contract. If I buy 30 contracts its $45. In the case of AGNC, I got 30 Nov. 28's at .20 - total cost $645. If I sell at .60 (a "triple") then I make $1110 for an actual ~185% profit. Not bad and the "vig" didn't cripple my profits. If I want to get in at .20 and out .25 (a 20% profit) now the price structure really hurts and I actually make 10%. What I was really asking is what is the options cost for you with your trading platform.
do you expect the calls to decrease significantly after ex-divd for both AGNC and KMP? Yesterday AGNC March 2011 $27 calls were $1.65. Is there a significant drop in call price after ex-divd or mid-november?
not bad ben, 43 percent profit in a couple weeks on a run up in PPS of less than 7 percent!
Now just sit and wait for some other high dividend paying stock to issue shares and do it again, woohoo.I'll let ya know if I see anything pop-up on my radar.
Congrats, and Cheers BB
Thanks Bruce for the encouragement.
To be honest, I don't really do anything but this, so this is my work place in many ways and having great colleagues to encourage me really means a lot. I don't post anywhere else too much, and have enjoyed the atmosphere here a lot.
So, now the MLP's (KMP and EPD) and then back to AGNC. I am very interested in watching LINN and ETP. I got into them too early. They took huge dips on ex-divdend, and had I been more patient, I would have done exceptionally well. I just bought them wrong. I took a slight loss on LINN and broke even on ETP. KMP is the best one I think for the price drop.
I might be the resident conspiracy nut on the forum.
Bankers wield a powerful influence over all the world governments. Votes or no votes, I don't think Obama and the Democrats are going to take a major source of revenue from the banks.
FYI, the last guy that tried to take on the bankers was JFK...
I own holdings in BAC, and of course AGNC.
I don't normally kiss and tell and I am a very humble person. I trust you are asking for a good reason, so I will tell you the details of the trade.
I believe this was God's work, and he just helped me focus. I really liken it to the parable of the talents.
I had 100 contracts. 19/03/10 strike 27. I purchased the 10,000 shares for $11,922 (average of $1.19 all in with costs. Today, I sold them all for $17,495 (average of $1.75 all in). The net profit was $5,573, which is a return of 46% (not 43%). I purchased them on 28/9/10. I would say that is way above average for me. The funny bit is that I lost so much in the dot.com bust, I don't have to worry about taxes.
I am sure had I held on to them they would have risen easily to $3 by 12/10, but I am not into holding risk when the stock might be flat for awhile and the market could change on me. I kind of thought I would be really bummed if I lost the opportunity.
We have had a good run, and this was above my threshold. I normally sell calls when the return hits 15%.
It was also on the back for a very, very fortunate trade on the puts earlier. So, I am off to a great quarter.
I will now be patient and focus on my MLP trades in KMP and EPD. I made some nice change on EPD today (15%), and I think I will do the same on KMP.
epd and kmp go ex-dividend on 28/11/10 (or approximately), so I will be laying low waiting for a good entry point on the calls for these two.
Then I will turn my attention back to AGNC as we get closer to December.
I have learned to buy larger blocks and take on selective risk. However, I personally think three to four weeks is a bit long for calls. Eventually, they will deteriorate in value from holding them anyway.
Although anything is possible during an election cycle, "mortgagefare" would be the similar to a "taking" in an eminent domain action, sans compensation. It would illegally deprive lenders of their collateral. The current BOA moratorium is intended to allow ample time to investigate improprieties in BOA's methods. We can only hope that it will be short in duration. However, we know that when votes are at stake, any advantage will be exploited. Hard to predict what the impact will be on REIT's.
The effects of the moratorium on prepayments can only be benign.
BAC is the only lender so far that's done a full 50 state moratorium. Non-judicial states like Kali, AZ, NV are the highest foreclosure states and there is no "prodcue the note" requirement in non-judicial states unless the borrower sues the lender. It's funny how fewer silly loans are originated in states where lenders know they will have to see a judge to get the collateral back. Florida is the lone exception. The banksters in non-judicial states are free to use the same level of dishonesty and shoddy record keeping on the foreclosure process that they used in the origination process. Banksters operate with impunity in non-judicial states, but so do borrowers, they borrowed with impunity in Az, Kali, Florida, NV. Those high foreclosure states are all either non-recourse or one-action states. Easy for borrowers to get a loan, easy for banksters to get back the collateral, easy for borrowers to dust themselves off debt free afterwards.
Offensive content to follow, feel free to stop reading:
Banksters and borrowers had a greased up orgy at Fannie's house. Fannie put up psychedelic posters advertising the orgy, she provided a live band, acid koolaid, free beer and chicken, but not condoms. Banksters and borrowers had a great time. He lied and said "I'm gainfully employed", she lied and said "I love you, just relax and sign here so we can get it on." They both sobered up and walked away relatively unscathed afterwards. The problem is that now the carefree whores keep dropping off all the blind, underweight, HIV infected illegitimate children spawned at the party on Fannie's doorstep. Fannie can't afford to take care of them either, but she knows that you can and will.
With the governemnt funding the ongoing purchase of loans from mortgage bankers and banks though subsidizing FNMA and FHLMC and the treasury buying them on the back end, there is just an artificial market value being created.
Mortgages are resembling 10 year treasuries, as they should because the government is backing the MBS.
So, something has to give. Who is going to tell the American people that the 30 year fixed rate loan is effectively a public handout? Let's create reasons that people are just victimised and brutalised by the same institutions that the government was so proud off when CRA ws in effect.
The eminment domain argument is interesting since the mortgages that are owned by FHLMC and FNMA are under the FHA and guranteed by the government.
I would love to sit in on meeting between Bernake and Obama, because Obama might kill the value of the homes securing the pools in the MBS owned by the treasury. I think Obama just wants to tear up mortgage loans through legislation or otherwise through the back door, and everyone can just have their free home, and write it off as one big mistake. Blame it on the banks for duping those innocent people. Afterall if someone gives you a loan and didn't tell you it was a mortgage, then well, you shouldn't have to pay it back. It is too liberal for me.
The one thing nice about living in the UK is the laws are much easier. If you default on the loan, that is it. They care a bit with the FSA, the same type of body Obama is creating. However, if you take out a loan can can't repay it, you can't get out of it because someone didn't complete a piece of paper correctly. There is a lot more common sense involved.
Anyway, lock them up in the London Tower.
ill tell you what happend look at the chart all the Kramer turds woke up and obeyed their master, and sold off at the open, but they dont have much money anyway because they listen to kramer so now the price can rise again glta
Ben, good ideas. You know, I think we just hit 28.04 and did the natural bounce back and will be good to go (unless nly does its offering, which is the one thing i am concerned about for this and the following week).
We know that it will go up until the earnings release, and no matter how awesome it will be, it will fall because too many greedy people bought in at these prices. I am thinking about selling my option calls (dec. 27.50) two days before the release. Thus getting the chance to buy puts the day before earnings for a day-two-or week, and then buy jan 28, which will be out next week, for the ride until dividend. What do you think, Ben?
Thanks in advance
I don't know what to suggest, because it is just a gut feel supported by my own rules. I obviously like making money, but for me I am doing this for my family, not just for speculation. It is my job.
I have this spread betting account in the UK, and you can bet on anything in the financial markets. From a trading perspective, it is a bit of fun. However, if I get on the wrong side of the trade, the losses are quick and steep. So, I have learned to work against gambler instincts and take tiny little profits to build up the account slowly.
When I lost $20,000 earlier this year on apple calls, it has taken me six months to get that loss back and make more money. I am finally up on the year by a nice margin and my confidence returned. To trade, I had to discipline myself. If a stock is up 3% to 5%, I take the profits. If a call is up 15%, I take the profits. I trade before dividend annoucements generally and before earnings releases. I only trade in high dividend stocks where there is a resaon for the stock to move up. My final rule is that I won't trade in stuff that is outside of my knowledge or tech, but I broke that rule last quarter because to move the trading platform to a new level I had to trade a bunch of MLP's. After trading around, I am now a fan of KMP and EPD.
Because of these rules, I sold out my AGNC calls when the shares were trading at $28 before the dividend. However, I had made profits three times last quarter in AGNC calls. So, why not take the profits and wait for the next opportunity. I can always take a ride again.
There are several types of risk:
1) micro or firm risks
2) Sector Risk
3) News risk
4) marco economic risks
5) political or disaster risks (some stocks, like energy can have their own issues [i.e., minds collapsing)
Firm Risk - I ticked off firm risk because AGNC has the secondary behind it and the earnings release will likely be positive.
Sector risk - yes, I noticed last quarter when NLY did its secondary it pulled AGNC back from $28.40.
News Risk - did we really need Cramer ruining the party?
Marco risks - market is okay, but and economic news has been okay.
Political risk - that one got me today. I just don't feel good about this uncertain non-sense with the foreclosure mess, and there has been this constant threat of something with FHLMC and FNMA. We have to realise that FHLMC and FNMA sit within the government now. Who knows the governmance process, and like it or not, they are our agent and guarantor.
War - last week we did have a threat that is gone.
Do you what you need to do? You are the only one that can judge yourself. Be ruthless in calculating your performance against the market. I am up 9% on my trading account year-to-date, and my wife's IRA is up 13% year-to-date. In dollars, it is not bad money, and I have 2 1/2 months to go.
In about two weeks, I will be picking up shares and calls for KMP and EPD at a lower price ex-dividend. I then wait on AGNC.
showing good support you cannot imagine the div buying power out thier right now looking for divs it comes from everywhere govts institutions, high pressure investment funds where fund managers are having their feet to the fire to produce returns.. to them agnc is the easy out for their port and to get their managers off their backs