Today, 1/19/11, I BTC 2 AMD Jan11 7.5 Covered Calls and STO 2 Jul11 8 Covered Calls for a net deposit of a whopping $56.95 cents in my taxable account.  My basis for these AMD shares is now 15.97.  This transaction represents a simple return of 1.75% and an annualized return of 3.23% 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 fifty cents at a net credit helped me to make the trades.  I also liked that I could do it by only rolling out to July.  The last time I rolled it out was way back in September of 2009.

S&P has a 12 month price target of 9.00 and a Hold rating but they have a poor track record predicting AMD price movement (correct 0% of the time in the past year).  Market Edge Second Opinion has a price opinion to 7.34 that they developed back in November 2010 and have a Long rating on the stock with a fair track record predicting AMD price movement (correct 42% of the time).  The Yahoo! Finance analysts have a 12 month price target of 8.43 with a recommendation of 3.0 (1.0 = Buy, 5.0 = Sell).

So, after all that, I will let AMD go just as soon as I can get something more than my basis for it.  I probably should let it go now but hope springs eternal and as long as I can continue to sell options on it my return on each transaction will increase as my basis reduces.  Also, I don’t need any more losses right now because I have enough from 2008 to last a few more years.  How’s that for rationalization. 

Today I BTC 2 AMD Oct09 5 Covered Calls and STO 2 AMD Jan11 7.50 Covered Calls for a net deposit of $38.99 in my taxable account.  My basis for these AMD shares is now 16.26.

AMD has been pretty much moving up since early Mar09.  It took a dip down in June and was down under $4 when my prior Covered Calls on it expired that month.  It appeared to me that it was going to stay down there or perhaps even fall lower as it has done in the past.  Hence, my choosing the Oct09 5 Covered Calls to sell at that time.  Now, the story looks a little different with AMD continuing to rise again.  I may regret going all the way out to Jan11 to sell the 7.50 strike but I was a little tired of rolling out and up without depositing some additional cash in the process.

Today I sold 2 AMD Oct09 5 Covered Calls for a net deposit of $42.49 in my taxable account.  My basis for these AMD shares is now 16.46.

I went out to Oct09 this time to be able to get a little extra premium.  I also sold the $5 strike price knowing that I may need to roll these calls out by October.  $5 has been a resistance level in the past though so I may be okay.  Time will tell.