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American Capital Agency Corp. Message Board

  • ben9471 ben9471 Dec 1, 2011 6:25 PM Flag

    Doc or anyone, 1.40 or bust?

    Okay, now i have to know. Are you holding through dividend declaration or not? I keep going back and forth. i can see how it makes sense for them, if they can, to pay the 1.40. There is plenty of reasons to doubt, but plenty of reasons to believe. Based on last quarter and last year, we can hit c30' with 1.40. i am wondering whether to play for the whole run. i could use 29.90, but it wont kill me to take my profits at or near 29. I really am on the fence, so this is not an effort to put anyone on the spot. its worth 7,600 to hold, but if i hold, i might not make my current profits which aint bad. It cuts to whether 1.30 is priced in. The analyst community is certainly conservative.

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    • Thanks for the correction Tay...My bad. I should have typed it better and shut my mouth until I went back to my notes. Their previous spo was 40.5 mil to underwriters at 27.36. and the 2008 part of the prospectus mentions the max spo price to be 27.83 and in the addendum they would release 26,162,000 shares, incorporating those not previously sold.
      Someone's original question was what does that figure of 27.83 have to do with the price of an spo. And it is my take that since the underwriters have a set price at which they obtained the shares, then the company sets a relative price at which they they want them distributed and they use that figure to estimate proceeds etc and it marks their potential.
      Logically wouldn't it keep underwriters from also pushing up the price to artificially high pps? With a max price, underwriters would be required to sell to retail at no higher or within some set margin of that 27.83. Interesting question to ask someones broker for the specifics how that number influences the spo price, retail price such as in dripping in.

    • Hi Sneidermich, I think you mean $27.73 not $28.73 if you are referring to the page underneath the title page of the December 1st 4242B2

      "Common Stock, par value $0.01 per share 25,000,000 $27.83 $695,750,000 $79,733"

      If that's the case IMO that $27.83 has nothing to do with the price they will sell the shares at, it's just a "placeholder" value that they used to calculate the total registration fee costs.

    • Thanks RIM, yes I'll definitely keep right on trading after paying off the house. If I can keep performing well I'll be right back to the same amount within a few years.

    • Thanks Foxy, One of the reasons for paying it off completely is to completely remove the risk of losing the funds on a trade. It's an acknowledgement that I am not infallible and I want to make sure that I have something to show for all these trades.

      Years ago when I was a young Corporal I would collect guns in order to tie up my paycheck so that I wouldn't waste it on beer and beyatches. Self enforced savings. I would later sell the guns at a profit. It worked for me. AGNC options aren't beer and beyatches, but I now feel the same need to tie up some money where it's gamble proof. All your suggestions make sense from a financial standpoint, but paying off the house completely is more of a self disciplining activity than a financially optimizing activity.

      I used credit card cash advances and a cash out refi in late 2008 when I first started trading to generate seed money. I also margined that at brokerages sometimes, meaning that I borrowed money on borrowed money, so I well know the pressure of trading under a debt load. It all went well, and it will be celebration to apply some of the overall 20x bagger achieved over the last three years to completely paying off that cash out refi.

    • Or better yet see this Investopedia article I linked to a little while ago:

      It covers the issues I have been talking about and confirms that they do exist.

    • "My apologies for not reading your mind."

      I accept your apologies, but I will suggest that it is not a question of reading my mind, because my original comment on this was, I believe, factual and unambiguous.

      I understand that you and others here have not had fill quality problems with AGNC, but I asked Rim because he reported larger trades. Fill quality is a MAJOR issue for option traders, and I have had enough bad experiences over the years that I want to get as many data points as I can for a particular stock. Sorry if this annoys you.

    • Rim, in my original comment on this I said that I have the June 24s, and the bid/ask on those was 4.30/5.10, so that was even worse on the bid than the 26s you mention.

      Maybe the AGNC MMs will always oblige and fill at or near intrinsic, but I can assure you that not all MMs do this. Which you can easily confirm by googling the words option, order, and "fill quality".

    • >>You know, it was not a major point, except reits_r_us decided to make it one>>

      No...I merely brought up the point that this has been asked and answered B4(asked by you, answered by many), but you keep bringing it up. The spread does not matter with this stock on deep ITM options if you sell at par up to 10 cents less.

      Why do I know that you are not finished with this topic...;-)

    • Make it easy...Put in a GTC order to sell at a level that is reasonable...If it sells, celebrate and forget about it...

    • OK,

      I see the problem. When the option exploration date is out, say six month or more, the Ask price will have a premium, sometimes significant, above intrinsic. Today at close of $28.71, the 12Jun$26 calls have a bid of $2.40 and an ask of $3.20. I would not expect to be able to sell to close 12Jun$26 calls for more than $2.70 and that is where I would place my sell to close order. If that didn't get filled I would try the sell to close for $2.65. My experience is that if the first try didn't get filled the second try would. I'm saying that worst case would be $.10 below intrinsic but most likely it would be at intrinsic (par).

      More times than you would think, after an SPO or on Ex-div the Deep ITM leap calls will be listed with an Ask price of $.10 to $.15 above intrinsic (par). I have even seen them cheaper than calls only 4 month out. They don't stay there long, but a quick order will get filled and that's like have insurance for nothing. Never had trouble selling to close Leaps at par which is great when you pick them up for cheap.

      GL2UA and go AGNC.


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