I have been following this board for around 3+years and learned a lot from the discussions here. This is my first message to Yahoo groups - Want to ask a question.
I have 2013 Jan 35 calls, which I bought very chip around 3-6 months ago. They have appreciated a lot, but I think they have more potential. So, what I am thinking to do, is get say Jan 39 calls now and at later time short Jan 37s (Long butterfly spread), just to protect in case the stock goes down. just wondering what your opinion is on this and if there would be other strategies that is worth looking at in your opinion.
Everybody's input would be much appreciated.
I recommend taking your profits.
With the earnings preview we got with the SPO, I think details will scare a lot of people and we might see a dip to 34.50, max pain maybe 33.85.
Then you can buy your options back and ride the ex-div run. Of course, AGNC might not dip, so you're taking a chance.
"...we might see a dip to 34.50, max pain maybe 33.85..."
I'm gathering that you are using the term "max pain" colloquially, to describe how low AGNC's price might go in the short term. To eliminate confusion, you may wish to avoid using the term "max pain" in this context, as option traders actually use the term "max pain" to describe a situation wherein their options expire worthless:
I agree with Olee, I am a little cautious with the earnings, and just sold my 130119c35s for $1.05 I bought them on the SPO and couldnt risk losing a 25.5% gain in 2 weeks. I am still long AGNC stock and some options. And bullish long term.
Thanks for the input.
Doc, I usually monitor my account nightly. The assignment usually happens during the night. My broker gives the option of covering this kind of shorts during first 10 minutes of trading, then if it is not covered, the system will cover for me (of course with the worst possible outcome for me).
Ole, when you say max pain 33.85, do you mean for Aug opex? I am not that familiar with the max pain.
Just a cautionary word re the butterfly, or any combination, with short options, is that the butterfly can be broken if the short legs become assigned...then your margin requirements change. This has happened a number of times to me. So if you have 50 spreads, meaning 100 short legs, your position can shock you when you see 10,000 short shares in your account, and a phone call from your broker.
They don't care about your Long Calls, because all they see are the short assigned shares in your account. You can subsequently ask the nice broker to exercise your Calls against the short shares and all will be well, but before that order is given by you, the broker will be after you if you don't have the margin to be short 10,000 shares in that example. So don't think you are covered, against all contingencies, with the butterfly...
Sounds like your doing just fine.
IMO you have to find what's comfortable for you and your style.
I am more conservative than others here. I'm rarely 100% bullish this far from the divvie. I try for singles, up and down until closer to the run. Not saying better or worse, just different. Plus I tend to miss big up moves if they happen early.
I'm sure some others will weigh in on your position. There are a lot of helpful, informative, intelligent people here (even if we do get distracted bickering about OTs on occasion)
Sounds like you have your strategy down. Beyond that it's really a personal decision based on how much protection you want to have on and how choppy you think the water will get through earnings, Jackson Hole, and Aug. op ex.
At present I'm neutral. With the drop today I had an order in to go about 20% bullish but it didn't quite fill. I was pretty aggressive on price though because I'm comfortable where I'm at and will wait for a bigger move in either direction to change stance.
Welcome to a Yahoo message board!
I'm not as familiar with the butterfly position. What benefits does it offer over selling Jan 36 or 37?
Are you nervous about being ATM sitting long on a ton of premium?