This stock has hit the 52 week high today despite the huge negativity in the market. I am assuming this to hit 31 by the friday close.
Is it a good short AFTER the price adjusted opening on ex dividened date. I think this will go atleast a dollar down than the opening price on ex dividend date. Any ideas, Pls share???
My extremely simple system that has been very successful with AGNC is to keep an open buy order that has varied from $20 to $29 as time has gone on and keep accumulating shares with my divi money.
I'm up over 100% doing this for over two years.
I'd think you'd be up considerably more than that, considering in the past two years AGNC has nearly doubled, while giving ~20% dividends each year. With the compounding from reinvesting you should be up well over 150%. Unless you meant more like 18 months or something.
But yes, that probably is the optimal strategy. Use the div money to buy on the artificial dips created by divs and SPOs. It maximizes the value of your original investment, as long as AGNC keeps appreciating.
I never short securities; the risk/reward just isn't there. The most profit one can make in shorting is 100% --- and that's only if the company goes bankrupt and the share price goes to zero. Buying, on the other hand has unlimited potential. We've seen a few stocks go up 2x - 10x their share price at market bottom on 3/9/2009. Better to sit in cash than short a stock, with that high of a risk/reward ratio.
I agree with your philosophy about shorting stocks, and doing so any time around the ex-dividend date is especially risky. Anybody who does so better understand who receives or pays the dividend, and at which point in time.
What I would add to your advice is that although what you say about your potential gain being limited to 100% of your "borrowed" PPS is true, your potential losses are unlimited, as there is no limit to how high the PPS can increase. The potential percentage increase on a low priced stock is especially dangerous. What happens if while you are shorting a stock there is an announcement of a buy-out by a generous suitor seeking low priced stocks?
The risk/reward is there when the probability of decline is greater than the probability of increase over the term of your position. Unless you have actually calculated the probability of decline to 0 and the probability of increase to infinity as being significant over that term, then those are events of negligible probability.
Go long when you're bullish, short when you're bearish, and stay out when you're uncertain. To do otherwise is to amplify risk and leave reward on the table.
Pre-market shorting is what drives the price down at the open on the ex-div date. If you do short, you'll have to cover quickly, because the price usually recovers.
And don't expect it to drop the whole $1.40 in the first place.