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American Capital Agency Corp. Message Board

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  • jtrader64 jtrader64 Feb 6, 2013 12:11 PM Flag

    Ot.....ARIA calls

    Onion -

    If you are an options player and think they'll pin ARIA at $20 at Feb. opex, take a look at a butterfly.

    Long 1 19 call
    Short 2 20 calls
    Long 1 21 call

    Using the midpoints for right now between the bid/ask (you'd enter the order as a combo with a limit price), I get an out of pocket of 40 cents (which is your max. loss). If it closes at 20, you get paid a $1 (and make 60 cents). If it closes at 19.40, you get 40 cents (and breakeven), if it closes at 20.40, you get .60 cents (and make 20 cents), etc.

    Max. loss, as I mentioned is your outlay of .40. This is true if price drops to zero or goes to $40.

 
AGNC
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