Good news from management.

music selection:  “Head Like A Hole (Live)” — Nine Inch Nails

NLY management finally spoke up and shares are up over 23% this morning.  There has been a lot of concern that the company could take a serious hit from margin calls on the 7% of its holdings that are not agency backed.  Management noted today that liquidity is good and that book value is 7.06 per share.  Shares trade at a steep discount to that now.

My 4.5 and 5 strike puts are now out of the money and look to finish that way.  I’ll be reducing my exposure after they expire but still betting big.  My new ceiling for writing puts is the 7 strike (I expect lower strikes to be at the money for some time.)  That would allow for an assignment yield of 14.29%.  I would juice that with covered calls targeting about an additional 5% annualized (out of the money enough to ensure it is unlikely to be called away).  I think I will do very well at that yield and this will be a new CORE position.

I will be looking to write puts on quality businesses with historically high return on assets and low debt so long as they trade at attractive valuations.  My ‘hot list’ includes MSFT, MO, V, AXP, DIS, HSY, KO, and MCD.  Funds earned in a month in excess of my budgetary needs will go towards a mix of cash and new closed end funds trading at a discount.

Devour your prey raptors!

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Update Annaly Capital Management (NLY)

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One thought on “Update Annaly Capital Management (NLY)

  • April 13, 2020 at 4:13 am
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    I’d keep the mortgage exposure limited for a while. One, this is exposure to a coastal/urban housing bubble that seems increasingly tenuous. Two, it’s virtually impossible to estimate the default rate during a crisis in which unemployment is rising at a rate faster than ever in history.

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