Monday, December 20, 2010

Playing AGNC

I sold part of my position in American Capital Agency Corp. (AGNC). I bought shares of this REIT to enjoy a huge, almost 20%, yield. Why did I sell it then?
Simple. In the last 5 quarters, price of the stock fell after ex dividend day more than the dividend itself. Quite unusual, and quite inviting pattern. I think I can make more money buying it after ex dividend date around $27 and selling in the range $29.50-$30 right before next ex dividend date.
Why is it happening? Don't know and don't care. As long as this arbitrage is working, I'm running it.

Full disclosure: at the time of publication author had a long position in AGNC.

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Justin Maat said...

That's exactly how I've been playing the REIT's but something is up right now with AGNC. It seems to be recovering too fast from the drop after ex-div. I typically would buy this a few days after ex-div, and even more on a secondary offering, but I'm weary right now because it seems that the usual trend is broken.

What are you're thoughts? I'm beginning to think the general psychology for REIT's is beginning to change. (at some point I want to short but am waiting for interest rates to hike)

Alex Filonov said...

Well, nothing is certain... That's why I sold only part of my position, holding remaining shares to collect dividend.
Maybe this arbitrage is crowded, maybe there is something else going on. This trade didn't work this quarter.