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American Capital Agency Corp. Message Board

dm68_4510 2 posts  |  Last Activity: Sep 21, 2014 9:22 AM Member since: Feb 19, 2011
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  • Reply to

    The way forward

    by zidnuz2 Aug 6, 2014 6:42 PM
    dm68_4510 dm68_4510 Sep 21, 2014 9:22 AM Flag

    brentwelke,

    I hope this reply finds you. I have a friend who is very heavily vested in D. I would like to be able to advise her towards her best interests. I find your post very interesting. I am trying to understand some things. I have a number of questions, if you have the time to answer.

    I am new to the idea of senior securities. What exactly is the difference between DCUA and D?

    If interest rates rise, why would D lose market value but DCUA not?

    Do you actually hold a short position in D?

    Assuming you do hold a short D position, how are you getting an astronomical yield by being long DCUA and short D? Is it because DCUA pays 5.6% and D pays 3.6%? Meaning that you are getting the difference (spread) of 2%? That doesn't seem astronomical. Perhaps there is some other way you are getting a great yield.

    I'm not trying to interrogate, really. I am just trying to fully understand.

    Also, she is selling covered calls on D, yielding roughly 1.4% per month in addition to the dividend. That's pretty darn good. I notice that there is no options market for DCUA.

    Your point about diversification is well taken. But any insight or advice you can provide regarding D vs. DCUA is appreciated.

  • Reply to

    SINA - news is leaking out...

    by bullrunning2day Aug 11, 2014 10:22 AM
    dm68_4510 dm68_4510 Aug 12, 2014 10:04 AM Flag

    Why don't you sell $47 cash-covered puts on this? It only makes sense to sell one cc put at $47 for every 100 shares of willingness you are to acquire. The $47 8/16 expiration are about $1. If the price drops below $47 and you are assigned, that you means you actually get in at $46 ... unless you are wary of a sudden plunge? If the price doesn't drop, you pocket the put premium.

AGNC
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