AGNC – Bull Put Spread – March 2013

We have tried to run a put spread on AGNC to help capture its big dividends over the summer. Put premiums include the implied dividends between now and expiration, so if you are short an AGNC put you could be said to be capturing the dividend in advance. These OTM put options typically trade as expected future dividends + time value. So there is some advantage to selling them over a 6 month period, if AGNC price is relatively stable.

Let’s try an bull put spread to limit our risk:

Purchase  PUT  AGNC 27 Sept2013 AGNC1321U27 8 contracts  0.55   -452.95
    Sale  PUT  AGNC 33 Sept2013 AGNC1321U33 -8 contracts 3.31  2,634.99

Since this has a delta of 0.60 it is a pseudo long pos, so we need to treat it as if it has significant risk. So we will hedge the downside with a disaster hedge put at a shorter duration (this is a bit like a married put position, where the short Sept spread acts like the stock).

Purchase  PUT  AGNC 30 June2013 AGNC1322R30  8 contracts 0.61    -500.95

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>