Fannie Mae-No Politics (FNMA)

[kthomp19]

Still, the REALLY big winner would be SHORT common and LONG FNMAT...

That would have been a home run a few months ago, but FNMAS:FNMA and FMCKJ:FMCC are back to around 3:1 after dipping to 1.25:1 for a little while.

I feel sorry for those who switched from prefs to commons in July, though. It was pretty hard to imagine FNMAS:FNMA staying that low, especially with such low prices. If FNMAS truly is worth less than 10% of par then the commons are completely worthless.

I think short common/long pref could go either way now, at least in the short term. Long-term it's a slam dunk but cost of carry can do a number on it.

One trade I did advocate for, back when FMCKJ was at a 15% discount to FNMAS while FNMA and FMCC were almost at parity, was long FNMA/long FMCKJ/short FMCC/short FNMAS. That trade would have worked out beautifully. Unfortunately I couldn't put it on myself because I can't short in my primary trading account.