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American Capital Agency Corp. Message Board

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  • reits_r_us reits_r_us May 10, 2012 3:53 PM Flag

    Zounds! $32

    Hi Igster,

    The folks that bought Jun28Calls at the last SPO are the winners over my 28/29 Bull Call Spreads. I had 400 spreads.

    Spreads are ideal if you plan on holding till OPEX and the stock stays still. I'm talking about ITM options. When the stock takes off like AGNC has the leverage increases with the straight Calls because the profit is capped in the spreads by the short leg. You know how much your max profit is when entering the trade.

    On my eg the PPS did not have to go above 29 and I make the same. No advantage for PPS 31 or 50, my profit is capped. So when the 28 straight Call buyer, @ 1.80 cost, has the PPS stall at 29.80, he's cooked if he holds to OPEX. His 1.80 cost is gone. Whereas I keep everything on my Spread.

    So the advantage of the spread is when the PPS goes up to the short leg strike and no less. So less travel up in PPS for profits, cf to the straight Call buyer.The PPS goes above the straight Call buyers BE(28 +1.80) and his potential profit is unlimited as we are witnessing...;-) Go AGNC and all you Longs!

    Make sense?


19.11+0.03(+0.16%)May 25 4:00 PMEDT