Today, 1/31/12, I BTC 8 AA Apr12 10 Covered Calls and STO 8 AA Jan14 12.00 Covered Calls for a net option premium deposit of $475.87 in an IRA account.  My average basis for these AA shares is now 20.44, excluding dividends received.  These transactions represent a simple yield of about 2.83% and an annualized yield of about 1.44% with 718 days to expiration.

I find this trade a little humorous because I did almost exactly the same thing one year ago.  The only real difference was that I then was rolling up from an Apr11 $16 strike to a Jan12 $17.50.  Of course, I rolled out an extra year this time.  Then, in Aug11, I actually rolled in and down to the Aug11, $13 strike and was able to sell monthly options through Dec11.  Maybe I will be able to do something similar again with these shares.

I made this trade today because AA is ex-dividend tomorrow and I was a little in the money on my prior Covered Calls.  I did not to take the chance that somebody would call my shares away because of the recent run up and to capture the dividend, regardless that it is only 3 cents per share.  I would probably have been okay but decided to go ahead and get the additional cash deposited today and increase my potential called deposit by an additional $1600.

AA has been moving up of late.  The 16 Yahoo Analysts have a mean 12-month price target of $11.40 with a mean recommendation this week (and last week) of 2.5 where 1.0 is a Strong Buy and 5.0 is a Strong Sell.  S&P has a12-month price target of $13.00 with a Buy recommendation.  MarketEdge has a price opinion of $10.43 with a Long recommendation.

AA is one of those companies that reduced it dividend.  Back in February 2009 it paid 17 cents per share and has since reduced that dividend to 3 cents per share, including for the current quarter.  I look forward to the day when the dividend begins to recover.  In the meantime, I expect that I will continue to hold AA and collect the dividends such as they are and collect option premiums.

Today, 12/19/11, I sold 8 AA Apr12 $10.00 Covered Calls for a net option premium deposit of $361.94 in an IRA account.  My average basis for these AA shares is now $21.04, excluding dividends received.  This transaction represents a simple return of about 2.11% and an annualized return of about 6.25% on my prior basis, if held to maturity.

Unlike last month, I was unable to sell the near month Calls at this strike price to get a reasonable return.  I don’t that AA will get to $10 in April but if it does, I should have room to roll these options out and possibly up for another net credit to my account.  Choosing the $10 strike so far out is a bit of a gamble but I deemed it necessary this time.

The 16 Yahoo! Analysts have a mean 12-month price target of $12.73, down from $13.27 last month, with a mean recommendation this week of 2.5, down from 2.4 last month, where 1.0 is a Strong Buy and 5.0 is a Strong Sell.

AA is another of those companies that reduced it dividend.  Back in February 2009 it paid 17 cents per share and has since reduced that dividend to 3 cents per share, including for the current quarter.  I look forward to the day when the dividend begins to recover.  In the meantime, I expect that I will continue to hold AA and collect the dividends such as they are and collect option premiums.  I am tempted to buy some additional AA shares at this price but have decided to delay once again until at least next month.

Today, 11/21/11, I sold 8 AA Dec11 $10.00 Covered Calls for a net option premium deposit of $169.91 in an IRA account.  My average basis for these AA shares is now 21.49, excluding dividends received.  This transaction represents a simple return of about .98% and an annualized return of about 14.29% on my prior basis, if held to maturity.

Just like last month I sold the near month Calls at this strike price because I did not want to go too far out and still wanted to get a reasonable return.  I don’t that AA will get to $10 in December but if it does, I should have room to roll these options out and probably up for another net credit to my account.  Choosing the $10 strike is a bit of a gamble with AA currently trading at $9.28 as I write this.  You may remember that I made a similar comment when I sold the Nov11 $11 Calls. 

The 14 Yahoo! Analysts have a mean 12-month price target of $13.27, up from $11.45 last month, with a mean recommendation this week of 2.4, down from 2.3 last week, where 1.0 is a Strong Buy and 5.0 is a Strong Sell.

Last month I wrote about the talking heads saying that there is an increased worldwide demand for aluminum and aluminum products that is helping to drive up AA’s price.  I am not hearing that now but it may be because there is so much commentary about the European financial situation and how that may spill over into theU.S.economy.  Other minor distractions include the growingU.S.debt and the electioneering for next year’s presidential race. 

AA is another of those companies that reduced it dividend.  Back in February 2009 it paid 17 cents per share and has since reduced that dividend to 3 cents per share, including for the current quarter.  I look forward to the day when the dividend begins to recover.  In the meantime, I expect that I will continue to hold AA and collect the dividends such as they are and collect option premiums.  I am tempted to buy some additional AA shares at this price but have decided to delay that until at least next month.