This morning I BTC 2 AA Jul08 37.50 Puts and STO 3 AA Oct08 35 Puts for a net deposit of $460.26 in an IRA account.  My basis for AA if assigned would now be 31.16 with the stock currently trading at 34.29.

Notice that I BTC 2 contracts and STO 3 contracts at a lower strike price.  I’ve lowered my strike price by 2.50 and my new basis if assigned by almost 3.00 per share.  At the same time, I increased my potential liability by $3000.  I think this provides me some additional flexibility (cushion) if I need to roll the stock out again, get assigned the stock and sell covered calls on it or sell the stock if assigned.  By the way, if I am assigned these 3 AA contracts I would own 500 AA in this IRA account.  I also have previously sold and have outstanding 4 AA Oct08 40 Puts in my taxable account with a basis of 35.96 if assigned.  I’ll be watching these with the idea of maybe rolling them out sometime next week after options expire this Friday.

My current thought is that if I am assigned these AA shares I will probably hold them and sell Covered Calls while collecting the dividend.  This fits my general investment goals.  Unless there is a tremendous price drop I do not intend to sell any new Puts on AA unless these current Puts expire worthless.