Today, 2/8/12, I BTC 2 IR Feb12 $37 Covered Calls and STO 2 IR Sep12 $40 Covered Calls for a net deposit of $238.96 in an IRA account.  My basis for these IR shares is now $46.40, excluding dividends received.  In addition to the increase in my strike price by $3 these transactions represent a simple return of about 2.51% and an annualized return of about 4.04% on my prior basis.

I sold the Feb12 $37 call when IR was trading at about $34.50 with the idea that, although it was trending up, it would not reach $37 by February expiration.  The MACD, Williams and Stochastic indicators all suggested that IR was oversold and might pull back a bit or at least plateau below $37.  Of course, I do not claim to have any great expertise as a chartist or an interpreter of the various indicators but I do look at them to try to determine a possible stock direction.   Sometimes I am correct and sometimes I am not.

In any case, I have been watching IR hoping that it would fall below my strike price but it doesn’t appear as if that will be the case.  I decided to go ahead and roll the Calls out now because I could do so at a net credit while increasing the strike price once again.

S&P currently has a 12-month price target of $30 for IR and a Buy rating.  MarketEdge has a price opinion of $30.65 and a Long recommendation.  At this point, they both appear a little behind the curve.  The 18 Yahoo Analysts have a 12-month target of $38.50 and a recommendation of 2.3 where 1.0 is a Strong Buy and 5.0 is a Strong Sell.

IR raised its quarterly dividend twice in the past 12 months and now pays .16 per quarter which is about a 1.69% annual yield at it current price of $37.90.  My return will be about 1.38% on my new 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.