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American Capital Agency Corp. Message Board

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  • igsteri igsteri Oct 26, 2012 8:04 PM Flag

    OT: Doc question about WMC short puts

    Hi Doc,

    Thanks for your reply.

    Well, this is what I did today (probably unnecessary):
    I bought back the 10 13Jan22.50 puts @2.80 (sold them for $1.60 prior) thus locking $1,200 loss on the trade. Then I Re-sold 10 13Apr20 puts for $1.85 and collected $1,850 premium.

    According to my calculations that lowered my profit on the trade to $650 if they expire worthless in April. ($2,800-$1,600=$1,200loss) so $1,850-$1,200=$650collected from this WMC trade and my BE is now $19.35 (I think :)

    I wasn't optimistic that we'd be definitely over $22.50 in Jan, that's why I went with a lower strike and further month.

    What do you think about my first "Recycling" :) ?

    Best,
    Igster

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