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