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American Capital Agency Corp. Message Board

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  • alw59saw alw59saw Dec 4, 2012 10:51 AM Flag

    The real options trade for AGNC

    Disagree. The BEST risk/reward model is to buy 13Jan$30 (or $31) Call options for $1.00 (which I did on 11/13 --- can't get that $1.00 price now). The risk is $10,000 for 100 contracts; the reward will likely be a profit of $$23,000 (or more) with just a modest increase in pps during the dividend run-up this month. That's a 2.3:1 gain vs. your 2.4:5.6 loss model.

    Sentiment: Buy

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    • Hi AL,

      If you read the last sentence from IWB's post you will see the whole point of his message were the key words "right now" (as in Dec 3rd).

      ""That is the best risk/reward model you can get in AGNC options right now""

      Back on Nov 13th, the PPS was two dollars less than on Dec 3rd. Shoot, you could have picked up 100 contracts of Short Dec31/28Puts for 2.00 credit and already be up 1.00 today. Your BE was 30.00 on that trade, risk 1.00, and the PPS only has to go to 31.00 for the entire 2.00 credit(100 contracts = $20,000 profit) by OPEX.

      That was a deal! We end up at 31.00 @ EX and you are in a much worse risk/reward with your BE of 31.00. That won't happen, so nice get on the 30's. There were just much better risk/reward trades at that time(Nov 13th).


    • If you are going to talk about Nov 13th, I bought the Jan 29s for 0.80 on that date. Anyhow, I would say the 32/31 put spread is a better deal. I bought them for 0.75 ytd, and you can probably get it for that price tomorrow if this price holds (or falls)

20.75+0.11(+0.56%)May 1 4:00 PMEDT