On Tuesday, 9/22/09, I sold 2 PM Oct09 50 Covered Calls for a net deposit of $38.49 in an IRA account.  My basis for these PM shares is now 48.32, excluding dividends received.

I do like it when my basis is below the strike price of the Covered Calls I write on the underlying stock.  It’s happening more these days but not all of the time.  It just gives me more latitude to act, especially if I need to roll out the Calls.

I own these PM shares as a result of them being split off from MO a while back.  I also own KFT for the same reason.  I still own all of them and will probably continue to do so for the foreseeable future because they all pay reasonable dividends and I can increase my return by selling Covered Calls on each of them.

I chose the $50 strike price partly because it seems to be a resistance point for PM, partly because it is above my basis and partly because I could sell Oct09 Calls at that price even though the Call premium is not great.  You may recall that I prefer to sell closer in Calls when I can.  Regarding the resistance at 50:  PM’s 52 week high is 49.36 about a year ago.  The stock has been climbing steadily, with minor corrections, since early March.  So, I cannot really say with conviction that 50 is a resistance point but just looking at the chart suggests to me at least that it may be.