No worries, you don't come across as challenging, just inquiring. These contracts are illiquid and I don't run stop losses on anything. There have been occasions where I have had 50% unrealized losses on Roy and sat on them before eventually reaping 2x baggers on them. Given the fact that in the past I have put essentially all of my brokerage capital on Roy, and sometimes maxed out credit cards to fund the account I absolutely need that temporal safety.
The only reason that I have held through xd has been on occasions where I didn't think I could get cheaper prices xd than the ones I already had on my opportunistically created position. mREITs used to have frequent flash crashes, it was great in those days. I could sometimes margin up, score intraday 1.5x bagger on closed trades on enough contracts to get back off of margin and make the remaining contracts "free" to hold as long as I liked. Those were the days my friend. I paid off the mortgage on the house that I'm living in now that way. Holding through xd isn't a pre planned strategy, it's a contingency plan. In the past when I've done it it was a response to having bought at unbelievably low flash crash prices and thinking I could do better on a later div run up.
To each his own, I'm glad not everyone does it because then it would be a crowded trade.
They carefully manage inflation expectations so they can do LSAP without igniting inflation. They manage expectations by threatening to exit. There is no genuine danger of them exiting now for economic reasons because the labor force participation rate is horrible. But they will be forced to taper whether they like it or not to keeps UST's liquid and to avoid crossing UST SOMA maximums. Buying MBS instead of UST has been part of their strategy thus far to maintain liquidity in the UST market. But now the MBS market is also approaching liquidity limits and will be there by Dec 2014 if they maintain the current buying pace. What will be left for them to buy? Equities? Japanese bonds?
Hi Engie, I'll be glad to explain. My reasoning goes back to that margin of safety in my original post. Some catastrophe may cause a huge bearish correction during the first div run up, so I'd rather have 3 chances rather than one. Also, what if the next dividend is reduced to 75 cents before resuming 90 cent payouts on the one after that? Besides what might happen to the share price or global markets, I personally might get hit by a truck or something and be hospitalized and temporarily head injured and therefore unable to trade the first div run up. Calls prices on these high yielders don't contain much time value premium, sometimes none at all. I'm willing to pay a bit more for more chances to profit and temporal safety.
With AGNC leaps I have had occasions in the past in which I've held past xd because it never rallied to the price I wanted. If you like you can read some of the old posts on the AGNC board about "Roy" or "Roy Battie" strategies that talk about this.
Hi jdg, yes I'm sure we were bidding against each other today, but that's what happens when great minds think alike. I mis-spoke about yesterday, looking back my previous buy was back was on May 15th rather than yesterday. I added 20 more contracts of it for $1.20 at ~23 minutes before the close today. My average is now $1.40, very close to yours. Some lucky guy got 170 contracts of it for between $1.05 and $1.15 at 3:15 today.
Hopefully we won't offer against eachother on our exits, but with 2-3 divs to play it's unlikely that we will.
Nice work RIM, but I think July may be too soon an expiration because it misses the div run ups. I just added 20 more Decembers at $1.20. I paid $1.60 for them yesterday. You and JDG buying shows me that I am in good dirty dozen company here and gives me confidence. Just whilst typing this I got a fill on 10 more Dec $20's for 2.95 :) The December expiration gives me 2 intervening div run ups to play.
Check out IVR Jan 2015 $22's, I'll bet they can be had for 25 cents. IVR is now one of Merrill Ross's top picks.
up from what they were a year ago, down from what they were 6 months ago, and now ~= to end of 1Q13 values, so that should give you a decent guess as to what BV currently is, BV is now probably what was reported for 1q13 ER, $24.25. This is a great entry MTGE entry point.
The Fed is prepping the market for LSAP tapering with hints and that's scaring folk. They HAVE to taper LSAP to maintain liquidity, they can't buy as much with deficit shrinking, but because they also need to maintain liquidity in UST's they have to keep buying MBS too, they won't stop cold turkey. Even Fisher is against a cold turkey LSAP halt, calling such a halt "too violent". They will make small tapering moves that they well prep us for in speeches and hints.
I'm buying shares and calls, there is a margin of safety here. Even if the dividend gets reduced to 75 cents and next reported BV is $24.25 MTGE is still a great value at these prices.
Thanks for the quote, that's an excellent economic summary from WMC.
I Listened to Dallas Fed President Fisher today, who is the most hawkish of the bunch, on CNBC this morning. He stated that MBS LSAP would only be slowed someday rather than outright ceased because ceasing altogether would be too "violent" a shock for the market. The Fed now buys the majority of new MBS production and if they continue at this pace in a few months they may be buying all new production. He was against starting MBS purchases in the first place, but now that they buy so much that they dominate that market he recognizes that sudden cessation isn't an option. Looking even further down the road Fisher is very concerned about whether an orderly unwind of the fed's balance sheet can be accomplished some day.
Indeed it does take skill to manage a sell-off in your leveraged MBS assets without being forced to sell those assets at a loss to meet margin calls, and without being forced to issue dilutive equity. Especially when, as was the case in 1Q13, MBS diverged from UST and didn't sell off proportionately to interest rates. The skill is still present. These are actively managed portfolios so one must take the good with the bad.
Everybody blows it sooner or later. I think the main reason that I can now discern was the forward rolls, they wanted something special but perhaps they over-hedged at in inopportune moment too. Also, perhaps they sat on the new cash for too long cash after the SPO, but still had to pay the div on the new shares. Perhaps now that GK isn't CEO anymore the board 2nd guessed him and prevented him from controlling the portfolio and the SPO timing in a "too may cooks spoil the broth" scenario. We'll have to wait for the conference call Q&A to find out more clearly.
This is the biggest miss in AGNC history, but the results do show that they are willing to report bad news rather than attempt to cover it up.
The 1q13 earnings will be released May 3rd after hours, and the conference call won't be until May 6th. I find that timing to be a bit strange. It's atypical and perhaps it could mean that the news is very good or that it's very bad. Has anyone ever seen companies release in the AH on a Friday before? If so, was it good news or bad?
Here's a tip for you on call trades, I have been buying JRCC leap calls lately. Specifically JRCC150117C1.5. I am not saying that management is the best, and there is of course the risk that JRCC dines at Burger King, giving me a goose egg on the calls. The the calls I bought for an average cost of 98 cents break even intrinsically at $2.18. If they don't declare BK then I think odds are that the calls will give me an intrinsic 3x bagger sometime between now and opex. Off the cuff I place the odds of BK at less than 40%. So 3x more upside to downside, and my losses are limited to the options cost. Rolling the dice.
Sorry, confused myself, I should have said div run up. They may SPO on the run up or soon after xd. I'm not the best at predicting SPO timing.
I'm thinking that the ER will be great, and that the SPO will be on a post ER rally. I soild WMC today and bought more MTGE with the cash. I posted my reasoning http://finance.yahoo.com/mbview/threadview/?&bn=c7049093-faf3-334f-a3c6-cb6ecaff97fc&tid=1363865836156-8aa1f868-ef4d-4d25-beb5-61db5a390cb7&tls=la%2Cd%2C1%2C3 if you're interested.
That was me. I rotated out of WMC and used the cash to buy more MTGE today. I had 2x the div in unrealized gains on WMC which is my minimum threshold for swing trading. I made that in less than a month holding period, and got out before the next SPO or selloff, I am satisfied with that. WMC is in the SPO zone temporally and on p/b valuation, whereas MTGE is now trading just a smidgen below BV and with it's fairly recent SPO in February it probably won't have an SPO b4 the next post ER rally. Also, the 30y UST rate backup trend that was formerly greatly benefiting one of WMC's hedge positions has come to a screeching halt on Cyprus flight to safety. Cyprus has also made MTGE's February SPO timing fortuitous in hindsight, so I expect BV gains for MTGE in 1q13.