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American Capital Agency Corp. Message Board

  • reits_r_us reits_r_us Jan 23, 2012 1:55 PM Flag


    Other thread is getting crowded. I wanted to explain how the LINE Butterfly turned out this morning.

    As you might remember I had placed with the MP the Jan36/38/40 Put Butterfly Spread in a 25/50/25, 25 contract Spread by Going Long the 36 and 40's and Short the 38's.

    I was assigned on the 38's and 40's. This meant I was Long 5000 shares at 38 and Short 2500 Shares at 40. 2500 of the shares washed and I was left with 2500 shares Long at 38.

    So I was up 2.00 x 2500 from the 40-38 difference or $5000. And I was down 38.00(strike)-36.38(PPS close) x 2500 or $4050. The trade cost me .30 x 25 or $750, leaving a net gain or profit of $200.

    I decided not to sell the 2500 shares at 38.00 that were the left over 25, 38's that had been "put" to me. So I am now Long 2500 shares at current PPS of 36.80.

    I am hoping for 38 PPS by EX. This would wash my cost on these 2500 shares @ 38, and we would end up with $5000 minus $750 cost or $4250 by EX less commissions for the Butterfly. That would be a 566% return in a couple of weeks.

    Yes Ephort, I could have just purchased the shares by exercising the 36's, but you know....;-)

    Your comments?

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    • As Danger Mouse's trusty side kick Penfold (code name Jigsaw) use to say -

      “Oh crumbs, DM” :-)


    • Ros - I like that point of view, but with the early distribution announcement I wonder if there might be an SPO coming? Right now I'm hanging on with you, but I fear turning a $20k loss into a $40k loss.


    • The dist is only .60+ so exdiv drop by itself won't be too severe. There are 15 trading days to opex so a possible time to rebound. It seems to have bounced off 65 again.

    • not yet resigned to pain yet on evep. the selllers are being wrung out. i honestly dont know why this stock eas ever so hot. if can handle a loss. i have done well and sometimes you hVe togive it back, but this was an overtrade and i wadnot convinced when i did it. i remember thinking that i should stop messing with these mlps. but oka, i am here now. estch 65. if we hold i suspect someone is coming in here. i might hang on. i cant decide till i can see it on the monitoes. good luck!

    • Hey Ben,

      Yet another good lesson for me about greed. I had a very respectable profit on paper when EVEP was above 72 just a couple of weeks back. Instead of recognizing the "opportunity at hand", I stuck to my price projections, and I am now paying the price. Flexibility is very important. If that means getting rich by getting out "too soon", then so be it.

      BTW, My lastest proxy for LINE shows a range of 37.33 to 38.66, with an average of 38.04. If LINE can reach 38, it will soften some of EVEP's pain.


    • I feel you Doc every single position of mine is against me today long and short. These are the days that make it hard. GLTA

    • okay, no telling anyone so. the logic was sensible. sometimes you pay at trading u, and i only have paper losses. cooler heads prevail. bottom line is this is pain with which i am experienced with evep at 65. if we can hold here, maybe the shares have been tendered that are to be tendered. there is today and tomorrow, and as long as we hold at 65' the abyss aint that bad. below 65, 10k loss and time to make it back. i have made plenty and plenty when docs views have been followed. i am not rescuing the trade, but i have seen worse. so lets not let this go beyond what it is. some pain on the way to greater glory. no worries, yet. everytime i have dumped it feels better, then worse when it moves the other way. good luck and doc, no worries from me.

    • Thanks.

    • Hi Doc,

      I told you last week that I had that Gravol feeling about divy run. Now I have same opinion about shorting this one, just un predictable.

    • Hey everyone,

      With only one more day and my back up against the work wall and the EX date I am out. Averaged down today at 2.4 avg sell to close. MP on 30 Feb65Calls bought at 3.10 -2.40= .60. Times 100x 30 = $1800 loss.

      It is just behaving too weak for me. No volume and lots of red. There are no buyers now since declaration, which is totally foreign for EVEP. We had a great run from Dec to a week B4 OPEX, which was typical. It was also typical for a pull back at OPEX and then a run to EX. Also, I am wondering why they declared so early. Might be an imminent spo coming after EX.

      Anyways, I hope for all you Longs we have a 5.00 day tomorrow(Up). I'm out, so it can fly now....;-)

      I also sold LINE on the open (36.80). AGNC is up against that 29.17-29.21 resistance. If it blows through I will adjust the Short Bear spread on the 29/30's. Good Grief!!!

      Good luck to all!!


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