On Friday, 5/6/11 my 2 ACAS May11 7 Covered Calls were assigned.  My 200 shares of ACAS were called away at the $7 strike price.  My basis had been $23.12 so this transaction resulted in a loss to me of about $3224.53 from my basis.

This was not a total surprise to me as ACAS had been rising for awhile and was well over $10 last Friday.  However, I was expecting that it would not be called until the 13th when options expire.  I had already pretty much resigned myself to letting it go because I just could not see a way to roll it out for a net deposit even at the same strike price.

Without going into any detail I will just say that I am glad to be out of ACAS at this time so I can redeploy the cash into assets that provide me with a better return.

Yesterday, 10/18/10 I BTC 2 ACAS Nov10 6 Covered Calls and STO 2 May11 7 Covered Calls for a net deposit of a whopping 98 cents in an IRA account.  My basis for these ACAS shares is now 23.12, excluding dividends received.  This transaction represents a simple return of .36% and an annualized return of .62% on my prior basis.

I made these trades because I am currently underwater by a good amount and did not want it called away just yet.  Being able to roll the strike up a dollar at a net credit (even though small) helped me to make the trades.  ACAS pulled back 18 cents today to close at 6.26 which makes me wonder if I should have waited another few days to see if it might have fallen below $6 again.  It’s just too bad that I cannot have better future vision.

Thomson Reuters continues to rate ACAS as Outperform on while S&P continues to have a 12 month price target of 7.00 and a Hold rating.  Market Edge Second Opinion has raised its price opinion to 5.59 from 5.01 and upgraded it to a Long from a Hold rating on the stock.

In August when I originally sold the Nov10 Covered Calls I wrote the following two paragraphs:

The market has not been kind to ACAS since mid-2008, for good reason.  As recently as March 2010, the ACAS auditors (Ernst & Young) had included in the audit report an explanatory paragraph regarding ACAS ability to continue as a going concern.  On June 30, 2010, E&Y issued an amendment statement the going concern issue no longer exists.  What changed?  Well, the company was able to complete a major restructuring of its unsecured borrowing arrangements and is no longer in default.

I read through much of the quarterly and annual returns last night and feel a little more encouraged about the future of ACAS.  Now if the stock price would just improve I would feel even better yet.  However, as my strike price and the analysts suggest, I suspect that it will be a little while yet before the stock price substantially improves.

So, now, it appears as if the stock price is going to improve (even thought down today) and I might actually be able to start making some additional option premium on it.  I think I just got a little too aggressive on my strike price and shorter holding period.

ACAS does not currently pay a cash dividend.  As a regulated investment company, ACAS is required to pay some level of dividends to retain that status under the IRS code.  Or that is how I understand it.  Apparently ACAS is limited to paying dividends with capital stock and only as much as necessary to maintain it status as a regulated investment company.  My last dividend payment was part cash and part stock.

Today, 9/15/10, I sold 54 shares of ACAS for a net deposit of $307.52 in an IRA account.  My sale price was 5.88.  I owned these shares as a result of a stock dividend in lieu of cash paid out by ACAS in August 2009.  My imputed value of these shares was $176.96 or 88 cents per share at the time.

I sold these shares because they represent an odd lot which does not allow me to sell Covered Calls on them.  In addition, it appears that ACAS will not be paying another dividend for awhile so I felt the time was right to turn these shares into cash which I can use to generate additional revenues.  In that sense, they were dead money even though the apparent return over my basis value is not too bad.

As I wrote earlier, I am feeling a greater need to do some house cleaning and redeploy some of my lower performing dollars into stocks that will produce a higher return.  This trade was made in that same spirit.