Apollo Residential Mortgage Inc (NYSE:AMTG) – New Option Trading


Dallas, Texas 09/11/2013 (Financialstrend) – Apollo Residential Mortgage Inc (NYSE:AMTG) is a holding company which operates as a residential real estate trust The Company primarily conducts its business through ARM Manager, LLC, a Delaware limited liability company and its other operating subsidiaries. The company is qualified as a real estate investment trust; as a result it would not be liable to pay corporate income tax on the portion of the income which it distributes to its shareholders.

Company’s underlying collateral includes securities like inverse interest only and interest only and it also includes adjustable and fixed rate mortgages which are collectively called Agency Derivatives. The company invests in finances and manages residential mortgage-backed securities (RMBS) that are issued or guaranteed by a federally chartered corporation, residential mortgage loans as well as other residential mortgage assets. The company also makes investment in RMBS even if it is not guaranteed or issued by the U.S. government Agency.

Investors in the company saw that some new AMTG options became available with the October, 19 Expiration. The put-contract with the strike price of $15.00 which currently has a bid of 80 cents is of particular interest. That means, investors are committing to purchase the stock at $15.00 if, they were to sell to open that particular put contract. However, they will also collect the premium; this puts the cost basis of the company’s shares at $14.20 (before broker commissions).

For an investor who is interested in buying the shares this proves to be an attractive option. As the strike price of $15.00 represents approximately 1% discount to the current price of the stock. On the other side there is a possibility that this put contract would expire worthless. The current analytical data suggest that the current chances of that happening are 51%

As per an analysts at Zacks the stock of the company was downgraded from a neutral rating to an underperform rating for September 10, 2013. And now as per Zacks the target price of the stock is $14.50.

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