Just sold my 1,994 contracts Jan $26 Calls a few minutes ago for between $3 and $3.10. Looks like pps resistance now is around $29.10
Honestly thought we would hit $29.25 to $29.50 but bad news and market is down so I bailed. (Probably heading lower and retest $28.80 - $29 yet today.)
I'm happy though - paid $2.20 for them. Thanks AGNC!
Merry Christmas and Good luck to all! Thanks to all who make this the best board on Yahoo! (and most profitable!)
Thank you for your kind words. To my point, you did take a risk in gambling on the side of the 1.40 dividend. If you are literally working on a billion, your trade(1/2 million) would be the same as a million dollar account risking $500. Scale is amazing, and assumptions are often made into the abyss of the unknown. Nice trade though!
Continued success and Merry Christmas!
So let me get what you just did Sold 1994 Jan 26 Calls, that is an exposure of 1994 X 100 = 199400 shares at $ 26.00 per share =
$ 5,184,000.00 AND if they were called,are u kidding me!!! Tell me you could have covered that call??? That is way to much exposure and I don't believe you. Your maintance for that trade would be $ 1,555,200.00!!
Thanks! Took a shot with my profits for the year and bought the 2k contracts to finish the year off with a bang!
The pps did head down after I posted and retested lows for at around 3:30pm at $28.92, glad I sold around 2pm when we were at $29.10, whew!
Market makers only buy them when they can make money on the other side. Started off at $3.50 this morning at the open and had to keep pricing them down till I got them sold between $3 and $3.10.
I expect the buyers exercised to collect the dividend once the contract prices headed lower.
Who in his right mind wants to buy Jan 2012 26 calls at 3? Within the next 4-5 weeks, I seriously doubt if AGNC will hit 29 again! I mean at best, the buyer of your calls is taking a huge risk. Let me put that another way, would you buy those calls at 3? Don't think so!! Crazy markets.
"Who in his right mind wants to buy Jan 2012 26 calls at 3?"
You are thinking that the guy who bought these now owns a lot of Jan calls he bought from Roy for $3. But no. Those calls don't exist any more. Options are not like shares. They are created with an opening trade, and they are destroyed when that trade is closed. They just disappear. So Roy's calls are history. Nobody owns them now.
So your question really becomes, Why would the guy that originally sold these calls to Roy want to close the trade? The answer to this question is long, and involves all the ways an option market maker (or option professional trader) makes money. Most probably what happened is this:
The guy who originally sold the options to Roy hedged them with shares, did what is called "dynamic hedging", ended up pocketing the premium, and today closed them (bought them back) at 5 or 10 cents below parity, which for 2,000 contracts is an additional $10,000 - $20,000. And he's now out of the trade, with a profit, and is not complaining.
Once in a while you hear that options are a "zero sum game". That's not true. Both sides of an option trade can profit. Who pays? In this case, it's the poor Joe out there who is trying hard to keep up with his mortgage payments. C'est la vie.