In my opinion, the dip in Agnc has been mainly due to short-term factors.
I suspect a lot of the people who bought Oct calls did so to take advantage of the run-up to earnings. The announcement is due next week, but the options expire today. So, all those people were up against the clock.
Some people wait until the last minute, while others set their exit point at some specific level, like approximately $27.75 or approximately $28 (or the corresponding price for the options they are holding).
I am not convinced that the talk about foreclosures has made any real impact on the price.
Consider the prices 1 year ago.
On Monday, 10/12/09, Agnc opened at $27.95. It hit a high of $28.10 several times during the week, but closed on Friday, 10/16/09 at $27.52 - almost a low close for the week. Again, it was option expiration day.
The following Monday, the stock opened up at $27.82, closing at $27.71. Tuesday it closed at $27.94. At the end of the day, Agnc announced strong earnings of $1.82/share, and Wednesday the stock closed at $28.11. Thursday's close was $28.91! Friday it opened at 29 and might have kept going, but Agnc did a secondary.
Who knows what will happen this year, but I would not make too much of the current dip. The real key is what happens next week. A strong earnings report could send us flying!
I was holding Oct 27 calls that I picked up for $.33. Sold those for $.85 - almost a triple. In hindsight, I should have sold my longer calls when we hit $28 and bought back at $27.50. But I am still holding and looking forward to next week.
This is not looking so pretty my friend. Your trend lines are going to be hit by the news. None of us, whether we agree with it or not, can avoid getting pulled into this mess.
Price broke through to the downside on the ascending trend line yesterday. However, the daily MACD and Stoch are still pointing up coupled with the 5EMA about to cross above the 20SMA. I will continue to stay long looking for a backtest of the trend line up to 28.29
Because the month of ex-divdiend is December. If you want to lose out on the last 15 days that is fine by me. December calls expire on the 16th (I think) and that is just about the time the announce the divdiend. Also, the calls will deteriate in value and could be worth about $.20 to $.30 less per call contract because of time unless the prices enough. Just my view, take your own.
Anyway, I sold my calls today. This mortage thing is bigger than I thought it woudld be.
Poke, I woudn't be doing the calls with Richard Bove out there telling the market is goind to cost $80B.
Options 101....... An option contract is an asset that will waste away with time. The time premium built into the contract is a reflection of volatility. Ben, I believe you are positioned in the Nov. 25 call because you are expecting an earnings run just like most of us next week so don't sweat it. There is absolutely no premium in the contract at all and reflects a better decision than buying the Dec or Mar contract with a 5.3% premium over your Nov call. The 15 point spread between bid and ask is a reflection of the low volatility and the primary dealer simply does not want the risk. Remember for every call you purchase there must be a seller and if not the dealer has to hedge his position against an inverse directional move.