Great trade, I think it's a winer! Good luck with it!
I tried to place it too, but apparently I'm level 1 so no spreads allowed. It's weird because they are letting me short puts but no spreads. How is a spread more risky than a short put?
Anyways, I ended up buying 13Mar28 and 13June28 Calls @ $4.90 .
Also, added more to my Nov31's , premium is cheap close to par, I'll roll them into leap calls if AGNC climbs a little more in November before OPEX.
Also shorted Dec33's at $1.57, I don't mind owning the shares at $31.43 if I can't get out in December.
Good luck with your trades and everyone long AGNC :)
Igster We have talked about this at length(long, long discussions) in the past and the short answer is, yes. The danger is if you have insufficient funds to buy the shares, your brokerage can( there is the rub....depending on the size, history, and level of your account, and discretion of your broker), close out your position, once assigned. Then the market can zoom back up and you are sitting on a big loss.
If you have the cash, you will never lose more than the difference between the strikes, minus the credit for the spread.
Moral, never short more contracts than you can cover. That's why I don't short AAPL or GOOG. 100 contracts is 6 million to cover @ 600/share.
I was looking at the Dec33Puts to short also. As I mentioned in a previous post, the EX is very likely to fall before Dec OPEX(as it did this last Sept). If that happens, the premium will most likely be adjusted up by .1-.3, and is not likely to give much back as the EX approaches, especially if the PPS is close to those strikes. I expect higher, but just saying , be forewarned.
If your strike is close to the money, there has to be a dividend left in the premium. That is why you score incredibly better if the EX is post OPEX. Here's hoping...;-)
Thank you for most excellent clarification on the risk difference between Bull Put Spread and Short Put strategies.
But, now I wonder, if you are concerned about the SEC pulling the plug on Mreits, then why are you accumulating WMC, NYMT, AGNC for their high dividend for 2013 as you stated recently? Would you protect them with cheap puts?