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American Capital Agency Corp. Message Board

  • engie095 engie095 Oct 15, 2012 9:11 PM Flag

    An implementation of Angrad's 90/10 hedging strategy for AGNC

    After the recent (and very helpful) discussions of hedging, I decided to hedge some AGNC calls I bought on the 9th using the 90/10 strategy that Angrad described. Of the money set aside for the trade, I used 10% for the bought-put hedge.

    On the 9th AGNC had dropped a bit, and I figured I'd be able to make some money on the rebound by buying some calls. It'll rebound on the 10th, right? Or at least the 11th? Right?

    10 Oct.33 calls
    10 Oct.32 puts
    The order was filled with the calls at $0.94 and the puts at $0.09 for my specified price of $1.03 for an investment of $1030.

    AGNC has dropped like a rock, and I sold my puts this morning for $850. That's a pretty good hedge on the $1030 investment. I'll probably still lose money on the trade, but now my max loss is $180 instead of the ~$940 it would have been if I had only bought the calls.

    Thanks again, Angrad, for the hedging information. Too bad I didn't know about it back when I was selling CQP Oct put spreads. Ugh. Gonna take a bath on that. But, at least I can take this into the future.

    Any suggestions on how I might have improved my hedge strategy are greatly appreciated.


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