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American Capital Agency Corp. Message Board

  • reits_r_us reits_r_us Dec 1, 2012 2:25 PM Flag

    The December Run is Here!

    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

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