katblat

$PSEC - in the magical place

NASDAQ:PSEC   PROSPECT CAPITAL CORPORATION
this is about 1 month away from a golden cross and in that magic place of no resistance with regards to volume shelves
Comment: This call option play has been good to me.
There are no bag/holders or selling pressure until around $6.36
March 19 $6 strike cost $25. I started collecting $5 strike for $25 each back in september and am currently up 300%. I will be adding $5 strike call options if it takes a dip and will add a few $6 strikes since price / share needs to be $6.25 to start making money and there is little resistance up to $6.36. Its not a lot of $ / option but its a cheap way to stack on some gains if you stack on the number of options you purchase. Good luck to all
better not bitter

Comments

PSEC redux.

When PSEC was $8.80 per share there was a reduction in the balance sheet assets of $500 million. The next quarterly conference call after hours discussed the decline in NAV. The stock traded down in the next session to below $6. there is always time to game PSEC when bad earnings are reported. On the next day the $9 strike puts were worth an additional $3 before the close of trading.

Lots of ways to make money here without hoping for a rise. That said:

PSEC is a 2/20 hedge fund wherein Mr. Barry who owns PSEC Management - bills on total assets. When PSEC sells a preferred stock offering the cash goes on the books and PSEC invests the capital. That market has been kind to PSEC in this interest environment.

I watch PSEC for hidden charge offs that reduce income. For example: If a loan was made to a midmarket company that cannot pay the debt, the loan is not immediately charged off. that loan generally has a provision that converts the non-performing loan to an equity position in the struggling company. This is then put on the book as an asset rather than a liability and this props up the fee for assets under managenment to PSEC Manegement as the outside advisor. Then in the follow on quarter the earnings decline while the NAV remains inflated. There is a lack of quality earnings and a cautionary tale for those unaware of the significance of this strategy to keep management fees up.

Additionally the sale of an asset like say an apartment complex that has been spiffed up generates a 20% didtribution on the gain to PSEC Management. Think of it this way: If I take $1 million to my bank they extract the $20,000 as the 2% fee. If I gained 10 percent on some investments but lost 20% on other investments, how would I feel about paying 20% of the 10% gains to the manager while the total in my account went down for the year?

That is how PSEC is treated by the manager. I am not saying that this is bad to game. But there is a lot of money to be made with a tip toe through the finanacials and watching for the downside.

For now the caveat is that PSEC has a lot of apartments and inflation is increasing the book value of those assets so the manager will be inclined to sell and get paid while showing an increase in NAV.

That is the current projected golden cross in my narrative.

I just like to game the downside when I see it coming. NAV is likely up a bit if the apartments are marked to market and the bad loans are converted to stock.

On that fateful day when PSEC hit an interday $5.80 the $4 strike cash secured puts were a ridiculous price. I game this my way on the rare occasion PSEC sets up for a killing to the downside.

Hopefully that cross materializes - in fact likely to happen. When the quarter is bad I am lurking as always.

On that drop one long posted that he owned 250,000 shares naked and lost $750,000 that never came back.

I can game that

yup PSEC is magical.
+1 Reply
katblat Spotshooter1983
@Spotshooter1983, wow! thank you for that. I am just a person that watches trends and charts technicals. Thank you thank you
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@katblat,

The charts show what has happened. I like to look behind and deep dive the financials as well. Then I can pick those 60% spotshots. Hence the cutsey screen name.
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