Today, 5/8/12, I BTC 9 BAC Jul12 $10.00 Covered Calls and STO 9 Jan12 $9.00 Covered Calls for a net deposit of $77.29 in an IRA account.  My basis for these BAC shares is now $15.66, excluding dividends received.  This transaction represents a simple return of about .55% and an annualized return of about 2.66% if held to expiration.

I took advantage of the market move down over the last few days to try to make a little extra option premium from BAC.  I took a chance by selling at the lower strike price but am confident that I can roll out and up again if necessary.

S&P has a 12-month target of $9 for BAC, down from a recent $10 target, and now has a 3 star (Hold), down from a 4 star (Buy) rating.  MarketEdge now has a price opinion of $7.74 and an Avoid rating.  The 25 Yahoo Analysts have a 12-month price target of $10.03 with a 2.8 recommendation where 1.0 is a Strong Buy and 5.0 is a Strong Sell.

BAC currently pays a paltry .01 quarterly dividend.  It has paid a .64 quarterly dividend as recently as September 2008.  I believe that BAC will eventually raise its dividend again.  I don’t know if it will be back to the .64 level but certainly it should be well above what it is now.  I continue to believe that BAC will be a strong winner for me one day, or maybe I should say someday in the future.  With that said, BAC has been performing pretty poorly lately and it is only my ability to trade these option contracts that keeps me interested in it at this time.

Today, 5/8/12, I BTC 2 ANR Jan13 $25 Covered Calls and STO 2 ANR Dec12 $20 Covered Calls for a net deposit of $78.97 in an IRA account.  My basis for these ANR shares is now $23.62.  These transactions provide a simple return of about 1.64% and an annualized return of about 2.62% on my basis if held to expiration.   

With stock prices falling so much I have recently been reviewing my open Covered Call positions looking for opportunities to roll them in and/or down to generate some additional cash flow.  ANR presented just such an opportunity – again.  In this case, I was able to decrease the strike price by $5 and decrease to time to expiration by one month.  I am now underwater on the stock but am confident that if ANR begins to recover that I will be able to roll out and up.  ANR has fallen so much recently that this is the fourth time in a little less than a year that I have rolled down ANR and twice in the past month.  ANR is a coal company and we all know (or should know) that the current administration has publicly said that they intend to virtually destroy the coal industry.  I suspect that I am safe with this strike price reduction and that these Calls will expire worthless in December 2012.

ANR does not intend to pay a dividend so I might let it be called away eventually.  On the other hand, ANR is turning out to be something of a cash cow from the option premiums; at least it appears so right now.  It may turn out that I can make a decent return by rolling out the Calls or, as I said above, they will expire worthless and I can just sell new Calls.  Time will tell.

As an added thought, I have started to trade ANR.  Last month I purchased some shares and sold the March $16 Covered Calls.  Those shares were called away at a profit.  I also sold March $15 Puts that expired worthless.  I also recently made other ANR trades that have not behaved as I hoped.  I have already written about them.

There are 23 Yahoo analysts currently tracking ANR.  They have an average 12-month price target of $22.35 with an average recommendation of 2.1 where 1.0 is a Strong Buy and 5.0 is a Strong Sell.  S&P has a 12-month target of $18 and a Hold recommendation.  MarketEdge continues a price opinion of $16.15 and an upgrade recommendation of Neutral from Avoid.  With price targets and recommendations all over the map it appears that the future continues to be up in the air.  However, the trend appears down.

Today, 5/7/12, I sold 2 May12 $16 Covered Calls for a net deposit of $55.73 in an IRA account.  This transaction represents a simple return of about 1.19% and an annualized return of about 36.15% with 12 days left to expiration.  My basis for these ANR shares in is now $15.43.

The weekly Covered Calls I sold on these ANR shares expired worthless last week.  I would have preferred to sell the weekly Calls expiring this Friday but decided to sell the monthly Calls that expire in two weeks in order to capture a larger premium.  There is just not very much money in the weekly $16 Call right now.  With any luck either the stock will be called away or I will be able to sell the May 25 weekly Call on these shares.

ANR does not pay a dividend so these ANR shares are most definitely a trade and not an investment.  S&P has a 12-month price target of $19 and a hold recommendation on ANR.  MarketEdge has a price opinion of $16.15 and a Neutral recommendation.  The 23 Yahoo analysts covering ANR are more optimistic with a 12-month price target of $23.26 and a recommendation of 2.0 where 1.0 is a Strong Buy and 5.0 is a Strong Sell.