Today I BTC 2 AA Oct08 35 Puts and STO 2 Apr09 35 Puts for a net deposit of $324.50 in an IRA account.  If put to me my basis in these AA shares would now be 30.07.

I was tempted to let the Oct08 Puts run closer to expiration and possibly let them be put to me but decided that I would be better served by rolling the Puts out and reducing my potential basis.  AA does pay a dividend so it generally fits my investment philosophy but the dividend is pretty small at .17 per quarter which is about 2.4% annualized at the current price of 26.82.  Right now I am pretty much in the mode of deferring acquisition of stocks if I can roll puts out instead.

Yesterday (yes I am finally caught up) I BTC 4 AA Oct 40 Puts and STO 4 AA Apr09 Puts for a net deposit of $497.99 in my taxable account.  My basis for these AA shares would now be 34.70 if assigned.

Although AA has been trending up recently I decided to reduce my chance of being surprised by an assignment that I don’t want at this time.  I haven’t mentioned it for awhile but I am still trying to reduce my margin exposure in this account.  I am doing that by not selling new puts, expiration of those puts that are out of the money and rolling out (and down where possible) existing in the money puts as they near expiration.  Rolling out increases my cash position and reduces my chance of being assigned in the near term.

I continue to hold three AA Oct08 35 Puts in an IRA account which I may allow to be put to me if they are still underwater as we near expiration.  If assigned to me I would then own a total of 500 shares of AA at an average basis under 30.  AA is trading at 32.40 at this writing. 

On 7/24/08, I sold 2 AA Sep08 40 Covered Calls for a net deposit of $74.50 in an IRA account.  My basis in these AA shares is now 28.88.

I originally acquired these shares at 37.50 so am looking for an additional 2.50 per share over my purchase price if these are called away.  AA also pays a small dividend of .17 per share per quarter for an annualized 2.17%.

I think of AA as part of my core holdings so do not really want to have it called away.  I just want to continue to sell out of the money covered calls and collect the quarterly dividends.  Eventually I will have all of my money out of it and the return will then be infinite.  I know you can hear the chipping sounds again.