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American Capital Agency Corp. Message Board

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  • slegermark slegermark Apr 18, 2012 1:07 PM Flag

    What to do with Jun 28/29 call spreads?

    Outstanding acquisition. When did you get them?

    Just off the cuff I think you will pick up another $100 per contract as time moves toward the june opex.

    I am also thinking that management will move x-div day to match up with opex.

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    • OOPS!
      I misunderstood your question. Please ignore my input.

    • Just looked up that info. On 3/9/12, opened up 220 AGNC Jun '12 28/29 call spread contracts at $0.78 per contract from my Optionhouse Roth IRA. The cost was $17,160. Normally, the options commission fee would be $78.50 for this transaction. However, I was not charged any commission as part of the "free trade" promotion (maybe either 1st 50 or 100 trades free).

      Back to my original question. Is it better to sell now to pocket some profit or to wait until both June contracts get exercised with max profit potential of $4840? ($22k-$17.16K).


      • 1 Reply to EEChicken
      • Hey Jack,

        Ignoring commissions, closing out both positions now would net you:

        2.55 (28s) minus 1.65 (29s) minus .78 (original cost)=.12/spread=$2,640 (15.3% ROI).

        Holding until expiration nets you at best, .22/spread=$4,840 (28.2% ROI).

        With your current BE at 28.78, buying back the short 29 calls for 1.65 would put your new BE at 30.43 (28.78 plus 1.65). So, If you think that price will rise higher than 30.65 (30.43 plus .22) prior to the June OPEX, you will have a greater ROI by closing out the short 29 calls now (before they rise more in value), and riding the long 28s to 30.65 and above.


    • Hold them for another month. As the dividend get closer they will go up due to people rushing into the stock. I am currently holding the Jan 2014 $32 strike. Feeling pretty good about those as well. They are dirt cheap.

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