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American Capital Agency Corp. Message Board

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  • reits_r_us reits_r_us Jan 4, 2013 1:43 AM Flag

    Question For Doc Reits

    Hey Flip,

    The stocks with options which trade on thinner volume use wider spread strikes. As interest increases, the options gain in closer spacing of the strikes and more availability in back months(leaps). It wasn't until Mar 2011, if memory serves me , that AGNC got our first Leaps in the 13Jan, which we are in right now. I thought at that time, wow, 2013, that was way out there, and here we are...;-)

    The MM's don't want to waste their time fooling with a bunch of strikes if no one is interested, is the basic answer to your question.

    Hope that helps,

    DocReits

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    • Upon a closer reading of your post, I wonder why you don't just sell the Leaps? Example sell the 14Jan12.50Call for 2.50. You get a 3.00 profit if the PPS is at 12.50 or above by 14JanOPEX(25% profit on today's cost of 11.99/share).

      You are protected down to 9.50 by 14JanOPEX, which is BE. Hard not to like it!

      DocReits

      • 1 Reply to reits_r_us
      • Thank You for the answer, Doc. That makes sense. But now you brought up another question in reference to your allternitive option...the LEAP. Please correct me if I am wrong or not thinking this out correctly. A LEAP is simply a much longer term CALL option then the monthly calls I generally sell..correct? The stock itself is "tied up" for a much longer time unless it gets called sometime during that year. If that's correct, I guess I don't do the Leaps as I really can't have the stock tied up for that long
        You are a "class" act, Doc and I always enjoy your posts. If you get a spare moment, please let me know if my assumption is correct and Thanks again

        Flip

        Sentiment: Buy

 
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