OK! The Nov slump is behind us. Much of the initial shock of mReits hitting the crapper in the event of no resolution over the FC has been priced in, and we have been inching forward out of the trenches after the fuselage of the lame press bombardment seizing every sensational opportunity to warn(read scare) us about the end of the world occurring as a result of the same...Lions and Tigers and "BEARS" ...Oh My!
But, as always , AGNC will march on and arrive at 34.00+ before its EX date at the end of THIS month, IMO. So how are we going to take advantage of this very likely outcome? We can hide under our beds and wait it out, which is safe, I agree, but it causes one to miss out on this most excellent and likely opportunity. How many times has AGNC been this far under book value, this close to EX?Correct me if I am wrong, but I believe the answer is zero.
Here is an interesting lining up of events, with the caveat of the wolf lurking in the forest(FC). Really low PPS valuation of AGNC and the monthly run to EX, hmmmm.....
Again how do we take advantage?
The safest play I still believe is the spread. You can do this with Calls on the 31/32 Bull Call Spread for about 50 cents. That places your BE at 31.50 and gives you 50 cents profit if OPEX is B4 EX, and PPS is at 32.00 or better.
The better way to play this is to do a long modified butterfly with Puts( a combination) Watch:
Long the Dec 40Put @ 9.50. Short the Dec34Put for 3.50 and long the Dec30Put for .50 in a 1/2/1 ratio for a 3.00 debit. BE at 31.00 and 37.00. Max loss at 40.00 or higher(3.00). Lower end maximum loss 1.00 @ 30.00 or lower. Maximum profit @ 34.00 for 3.00. This works best if EX is post OPEX, but it also works reversed(EX pre OPEX) as the long 40 Put retains value.
Your thoughts? Good trading! Exciting times...let's make some money!!
Sentiment: Strong Buy
Hi Doc and AGNC members-
I'm not a sophisticated investor just holding some Jan $31 and $32 Calls and hopefully that will be enough to make some money, even bigger money If the goons can eliminate the uncertainty. Oh yea Geitner will be on Meet the Press tonight, this may have an affect on Monday's opener. Hey does anyone have an opinion on WMC? I've been layering in this one for the last 4 weeks, ouch, the Calls are traded thinly with wide spreads but my gut says big run-up with divi increase potential or am I just smoking crack.
There is nothing but good news from the WMC camp, from TA to their fundamentals(among the lowest CPR of all mReits paying over 14%). I believe we will see spo offer price(22.50) by EX or better. I am with you and was down 40k on the swoon. Still down but only by about 8K(beats 40K). If I can make BE by EX I will be happy...lose some big, lose some small...,keep trading, with no more than 5% per trade, and trade another day....;-)
Sentiment: Strong Buy
Or, you could just buy the 13Jan$30 or $31 Call options. If, as predicted, the price of AGNC rises to $33-$34 by XD date, one makes the greatest % gain safely for the least amount risked, by selling the Calls a day or 3 before XD date.
That doesn't take a lot of investing experience or knowledge to profit from this move. You just have to believe --- it's CHRISTMAS!
I hope you are correct because I am getting tired of watching the agency mreits tread water after such a brutal decline. The non-agency mreits had a great week though and hopefully they keep it up in December.
At some point these things have to trade to book value plus. I can see the current price/book if they were not paying dividends and their book values were threatened but that is FAR from the current status. GLTA this month.
I think we still have some weakness ahead of us till ~ the 8th. I hope I am wrong as a decent chunk of my calls need 32.10 to BE and would like that comfort factor,
It appears you think that the doom and gloom artificially pushed PPS down and that will help springboard us back- again I hope so. last couple of Dec runs have been whimpers