NLY is a good buy below $15

Two months ago I talked about NLY and AGNC again, the two major mortgage REITs I like most. I don't want to repeat the rationale again here as you may check my previous blogs for details as you like. The main point I think NLY is a good buy below $15 is that it is significantly discounted below its book value at such a price. Well, NLY has been bouncing back and forth in a tight range between $14-15 since my last talk. At around $14 it is a screaming buy to me. Below are my two real naked put positions for NLY. The upper one I entered about 2 years ago, which will mature fully by Jan 18. As you can see, I have a paper profit close to 90% as of today. If NLY jumps above $15 on Jan 18, I will get a 100% profit of $23,000. The other one below is what I recently got into. I was a bit early but as of now my paper profit is about 4% in less than 2 months. I'm targeting for a $35,000 profit by Jan 2015, 2 years from now, if I'm lucky enough.

I must say I'm a bit aggressive here for such kind of positions. While I'm confident about the risk I'm taking based on my understanding of NLY, I won't recommend this to others as it could be volatile when people are panic in selling. However, if you simply buy NLY at this price for its high yield above 10% with a reasonable position size, I really think you will be happy down the road. Not only you will get a high yield income, you will likely also get a good capital gain when NLY returns to its normal share prices.  

NLY Jan 19 '13
$15 Put                        0.27              $2,600.00       -100           $2.30        +$20,220.26      +87.61%        -$2,700.00

NLY Jan 17 '15
$15 Put                       3.50              $4,500.00       -100            $3.65        +$1,412.51          +3.86%       -$35,000.00