Unusual Options Activity: AGNC Investment Corp (AGNC)

Shares of mortgage REIT AGNC Investment Corp (AGNC) have slid 35 percent over the past year. One trader sees a further decline in the months ahead.

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  • That’s based on the June 2023 $7.00 put. With 192 days until expiration, 32,159 contracts traded compared to a prior open interest of 358, for a 90-fold rise in volume on the trade. The buyer of the puts paid $0.26 to make the bet.

    AGNC stock recently traded near $10, so the stock would need to fall about $3, or 30 percent, in the next six months for the option to move in-the-money. Such a move is possible, as AGNC shares bottomed out at $7.30 back in October.

    It also won’t help shares that the company has lost $1.7 billion in the past year. Despite the drop in shares, however, the stock trades right at the book value of its loans. However, such loans can be written down if their value has subsequently dropped.

    Action to take: Investors may be enticed by the stock’s large 14.3 percent dividend. At current prices and the company’s earnings, that payout is unsustainable. It will likely be cut. Those interested in mortgage REITs should wait to buy after a dividend cut instead.

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  • For traders, the puts are well priced for a big drop in shares. That could cause the options to deliver triple-digit gains. However, shares may languish, or even head higher. So traders may want to start building a position now, and use a big down day in the stock to take some quick profits.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.