Today, Mar 1, 2010, I BTC 2 IR Mar10 30 Covered Calls and STO 2 IR Jan11 32.50 Covered Calls for a net deposit of $176.93 in an IRA account.  My basis for these IR shares is now 48.58, excluding dividends received.

These transactions not only increased my strike price by $2.50 but also allowed me to lock in a profit on the Calls I closed of $264.94 because I was able to BTC them for less than I originally sold them for.  I always like when that happens but would have preferred for them to expire worthless.

I’ve been watching IR for the past month hoping it would fall below and stay below $30 so that my Mar10 30 Calls would be able to expire worthless.  I’ve also been watching for an opportunity to roll the Mar10 calls out at a net credit.  The latter condition has been true for a little while now but with the stock starting to move up again it began to become more difficult to do without rolling all the way out to 2012.  And, I am pretty convinced that IR will not be below my old Mar10 30 strike when options expire this month.  Thus, my decision to roll IR out now.

S&P currently has a 12 month price target of $40 for IR.  If they are right I will need to roll IR out again before Jan11 expiration.

IR pays a small .07 per quarter dividend which is about .5% annual yield on my basis.  That is not stellar.  IR’s dividend was .18 per quarter as recently as May 2009.  Even at .18 IR’s dividend is not great.  Over time, unless called away sooner, my basis will decline as I continue to sell new Covered Calls and the dividend yield on my basis will improve.  The Call option premium will also increase my actual return on my investment in the stock