Anybody joining me on the FSC 9 day Phenomenon?? I missed out last month on 47 cents, for fear of the FC deal. As I outlined a few months ago, FSC has a very weird(because it is so consistent) trading pattern. I love history repeating itself. The longer I live the more it repeats, over and over and well, you get the idea. Like Buffet said, "the market always comes back". I didn't say that, he did...;-)
FSC is pretty uncanny in how it keeps coming back, and back and back to the swoon 9 days after EX date(monthlies) ...( buy on that date), and sell the day before EX date. You would have almost tripled your money over buy and hold, just this past year(12 cycles of this trade).
Last two months before the last were duds, but hey, 2 and 1/2 times for the year...;-)
Check it out. Swooned today. Look for the low of the month on Friday, the 25th. Buy 10,000 shares, as an example. This past month you would be $4700 richer. Hey, you can lose also, this month with the debt ceiling thing and all, but, like I said, fear kept me from making an extra $4700 this past month.
What I like about low priced, consistent stocks like FSC, is that they have a very tight trading range. Take your loss, if there is one on the DBEX or hold(I sell), and trade the next month, doing the same thing. The deal is it doesn't take too many 25% years to make up the entire PPS(4), then you are playing with the house's money even if the PPS goes to zero.
You miss the point of the trade and its beauty. It retraces every month. So what advantage is it going out further?? Options do not help here unless you short Puts. Even then you only collect the same as the dividend(10%). This method makes 25%(2011 and 2012).
This is a range bound stock(since Sept 2011), between 9-11. The trade is to capture the CA from the 9th trading day after EX to the DBEX the following month. Nothing fancy, straight-forward, doesn't take a chemist's formula, easy target, steady hand, deep breath, hold, squeeze(don't pull) and fire....;-)
Doc I’d like to play with this one but the next Washington brouhaha has me worried. The emperor has made it clear that he isn’t going to let that pesky constitution get in his way while the Pubs seem to be floating all kinds of trial balloons (they should own a party store). I own FSC and would really like to put your observation to work but I’m afraid I’m going to have to wait until the smoke settles.
I sold my MTGE about 3 - 4 weeks ago, and bought BDC's and REIT's with about half the money. I got a nice run on that, but the world doesn't look that good right now. So, I sold all the stuff I had bought in my retirement accounts for about a $30K gain this morning, and will wait for further developments. I am just guessing that better prices are coming sometime in the next month and a half. My FSC is in a retail account, however, so I plan on letting it ride for the divy even though I have about a 5% unrealized gain right now. Holding about 75% cash now.
I agree with you, better prices coming next month. Like your strategy.
I bought the last week of December - Reits, Mlps and two BDC's; PSEC and FSC.
I've a great run last couple of weeks, I'm not waiting for exdivs. I started selling last week.
I'll go 90% into cash by end of month. (I'll hold some options with the house's money.)
Let's see if we can pick these up for a lot less beginning mid Feb.
Sentiment: Strong Buy
So the trade is coming up a week from this Friday(25th). A few mods. Place a limit sell order after your purchase for .40 above the purchase price. Historically, this leads to even greater gains as you catch the intraday highs during the month.
ARR has the same historical pattern, but 5 days after EX for purchase, which is this Friday(18th). Buy and place a limit sell for 20 cents above purchase. This is 2.5x the regular dividend(.08) and historically has returned the greatest reward, oftentimes only holding for a few days on both of these trades.
Do your own DD and Good Luck!
It seems half the time the best buy is day9 or 10 xd inclusive and the other half is third day xdiv. So a person could do the acquisition in two lifts. Day 3 and day 10 xdiv day inclusive.
Only once in the last year did it crest more than five trading days before xdiv. A loose rule of thumb seems to converge at the market open two days before xd.
If you would have been lucky enough to hit the exact high and low, the last six months averaged 70 cents. A person should be able to get within 15 of each vertex and do it for 40-50, right where Doc advertized it. The nov/dec cycle had a spread of 107.
This cycle, with washington drama, the low could hit later than ten days out.
I am going to sit out this cycle keeping my powder dry in case there is a decent selloff, but when I do this one, I think I will margin up on it.
ARR is not as reliable as this one.
I agree Slegermark,
I thank Jess for getting me looking at the other end of it as far as shorting on the open of EX date. I just ran the numbers for doing this, with the caveat of covering if .40 gain before X+9(If not, just covering on the X+9 and going Long. Then selling at .40 gain, and if not, selling on DBEX.
From last January 2012 to the last EX date, you got 2.70 on the Long trade and 1.82 on the short for a total of 4.52(wow), or 44.2% yield on the original 10.22 PPS(Jan 11, 2012 open).
Pretty impressive!! Thanks for everyone's input...takes a village... right YBF?...;-)
I decided to back test FSC for 2011, starting with the EX on Dec 31, 2010 up until the DBEX on Jan 12, 2012. The PPS declined almost two dollars during that time from 12.14 to 10.32. Please keep that number in mind, again, a two dollar drop or roughly 15% decline on an approx 10.5% yield. Not Good for that year, is what I am trying to say...;-)
Following my suggested trade of shorting on the open of the EX day and covering on the 9th trading day post EX, immediately going long and selling on the next DBEX, here are the results for the above time period:
Short trade profits: 6.13
Long trade profits: 5.20
Total profits: 11.33 or 92% based on the opening PPS on Dec 31, 2010 of 12.29. A 100,000 investment returned $92,000. Really hard to argue with this trading idea...
The caveat I added to the short/long FSC trade of holding for .40 each entry had you making .80 with .40 short on the x day on Nov 13th to Nov 14th and then going long on the 14th to .40 gain and out on Nov 16th. 13th to 16th, three days and .80. Compare to 8 months of dividends to get the same...;-)
So to say again Short on the open of the Ex date, placing a limit buy to cover, for .40 lower on the short PPS. If hit before the 9 day long entry, go long from the exit price on the short, and enter a sell to close all shares at .40 above your buy PPS. If not hit by 9th day, double down Long and hold for .40 gain from the new buy PPS. Doing this returned almost 100% on each of the last two years.
AGNC message board....who would have guessed....;-)