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American Capital Agency Corp. Message Board

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  • robert_jdelaney robert_jdelaney Mar 16, 2012 2:39 PM Flag

    How to exit when it hits the fan

    Hi Doc,
    I have been following some of the trades you guys talk about. I would first have to probably expand my "options"- pardon the pun in the IRA to Advanced/Level 2 to try that.

    However, in such a trade as you describe below, a straight stock buy order without the options would need a .03% [($8,250,000-$8,225,000)/$8,250,000] stop loss to protect the equivalent loss on the downside which would be a share price of $80. (.03*$8,250,000=$247,500)

    So I do not see the benefit of such a move other than it limits my upside and I am better off with straight stock since my stock has no expiration date (with the stop loss at $80). Since it's stock I will go thru the exercise I explained and buy or sell based on the underpinning of the company and market dynamics.

    I follow KMR since it is an LLC and doe snot have that funky tax treatment. I see it with a forward looking 30 P/E, 3.2PEG and if Obama wins, large downside

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    • Hi Robert,

      >>stop loss to protect the equivalent loss on the downside which would be a share price of $80>>

      As you probably know, the danger inherent in the "stop loss" is that the PPS can blow through your stop price and you are closed out at 60 on a flash crash. The Puts protect you against the same.

      Good luck,

      DocReits

 
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