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American Capital Agency Corp. Message Board

  • olee2116 olee2116 Nov 2, 2011 2:24 PM Flag

    I'm done with shares

    You option guys have a point. Even though I'm collecting dividends from shares, my losses in stock price far exceed the dividends.

    I'm selling all my shares and going into cash with a small percentage allocated to options.

    It's complicated though...

    Are there time premiums?

    AGNC 12-17-11
    25 call
    Bid 2.80

    25 call
    Bid 3

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    • A possibly silly question: If EVERYONE interested in AGNC plays options and No One BUYS shares, will the pps stagnate rendering those options worthless? I'm talking "calls", not "puts". Since the status quo would be for AGNC to rise over 29to30, and no one buys shares the pps should stay the same(or drop due to profit takers , nervous nellies, and shorties), am I wrong? The fact that I am so ignorant in these matters may someone(s) be so kind as to further educate me? Thanks! FOXY

    • He said he wanted to sell the stock, and I was thinking that selling calls against his position would do that. If he gets exercised, he sells his stock (which he's looking to do). If he doesn't get exercised, he makes the premium on the option and collects the dividend.

    • Randy, he'll do fine. First off he won't go all in one one trade. Then he has us to help him out advice wise when it comes to any questions.


      1. Buy in installments
      2. Buy deep in the money calls - if 27, no higher than 25 (you'll save money on fees)

    • Then what you're describing is ordinary bad luck. Guess what? Option trading is also subject to ordinary bad luck too. I doubt that option trading is less risky than stock trading, but that's just my opinion.

    • No need for snide comments.

      I've made money on 100% on my AGNC trades. Yes you heard me, from early 2010, that's 100%.

      My major stock loss is BAC. I bought the stock before it bought Countrywide and Merrill, so your buy low sell high comment sucks.

      My other two stock losses are CWH and GOV, which were trading on the low range when I bought. Then the debt deal in august combined with europe smashed the trading range.

    • Olee, as you can see from all of these great replies, trading options is much more complex than trading shares. But they do have one thing in common: you have to buy low and sell high to make a profit (long trades, of course). If you haven't mastered that with shares then I'm not sure you'll find it any easier using options, but good luck.

    • Welcome, we all aim to help here on the AGNC BB (except for 1 or 2 really weird posters/bashers).

    • OK Doc,

      You have me. I knew when I hit the Post Message button that what I wrote was wrong, but since we were having guests over for dinner, I didn't have time to correct myself. Thanks for not giving up on me. Yes, I do know the distinctions between options and shares as well as what constitutes a contract.

      Love you too!!!


    • Great advice. Thanks Al!

    • That's what I did when I got started. I decided that I could not afford to risk more than $10,000 (if the options expired worthless, as Doc explained).

      Then, dividing $10,000 by the option price (x100) tells me how many option contracts I can afford to buy.

      Another thing that I did to get started is to track (on a spreadsheet) daily the Bid & Ask prices of the Call option maturity and strike price that interested me most, along with the AGNC closing stock price. I did this for about a month to get a feel for how much these options change in response to changes in the AGNC stock price --- I had a pretty good feel for the AGNC stock price movement over time, especially as certain events came up (like XDs, SPOs, earnings, etc.).

      After tracking for about a month, I was ready to dive in with real money. My first two trades resulted in gains of 54% and 40%, respectively. I'm now on my 3rd trade, with a small gain so far.

      One thing that I noted is that there did not appear to be a 1:1 correlation between AGNC stock price rise and the rise in Call option Bid & Ask prices. It was more like 1:0.9 (i.e., the Call options didn't go up as high as the stock; I guess because the MM needs to make a profit, too).

      Good luck with options trading.

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