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American Capital Agency Corp. Message Board

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  • return5x return5x Jan 19, 2012 4:09 PM Flag


    Doc - so if we are now sitting long the Feb65 calls (I got 105), and if there is a further pullback tomorrow, does it make sense to sell Feb65 puts against the calls to create a synthetic long? (See, I've been paying attention - but I'm not sure I have the fine points down yet!)

    As of the close, selling the puts would cut my net premium to about $1.65. Add strike 65 for total cost $66.65 against an expectation of $72.81+ equals a good payday (heck, I'd be happy at $68...)


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    • 5x,

      I am waiting till post EX to short Puts. Reason:

      1)Naked Shorts leave you exposed on the down side. Down side is often dramatic post EX and can eat your 65's really quickly. Look at the last Q's when the current PPS level hit the mid 50's. That would eat those 65's. If you plan to cover those puts at DBEX they will most likely work but the spread(bid/ask) will cut your gain in a it worth the exposure? Yin...Yang

      2)Look at the "Crumbs" plan. Long ITM Puts on DBEX, short puts on dramatic pull backs post EX(like 60, then the 60's and 55's will be the trade). By trading Long Puts first you are covered in a Spread. No more exposure to the downside.

      I'm just doing the historical thing....if I am wrong, I'm wrong....but EVERY Q in 2011 did this exact same thing, and EVERY Q came back to DBEX to close at contract high.

      History....hope it repeats....

    • 5x et al,

      I know you are hanging in there with over a 100 Calls on EVEP. I am acutely aware that we can lose all of this 40k. So, I just want to remind all that I am not God, and my feet are very much made of clay, even though Richard(Ross) doubts that....;-)

      I want 80 by EX! Or 85 like KMP. Then we'll have made 150k in two weeks. Got to love this....TYL!

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