On 1/19/10, I sold 5 BAC Mar10 18 Covered Calls for a net deposit of $131.18 in an IRA account.  My basis for these BAC shares is now 22.86, excluding dividends received.

At the time I sold these Calls, BAC was in the low 16’s and moving up.  It felt like a small risk to sell the 18 strike at that time.  I suspected that I might need to roll it out before expiration because it was moving up but there seemed to be some resistance around 17.50 which ultimately led me to choose the 18 strike.

Today it looks like I could have chosen the 16 strike price as BAC, along with most stocks, is falling.  It is at 14.92 as I write this.

S&P has a 12 month price target of $22 from a  report published on Jan 30, 2010.  I suspect that the current pull back in the market is short term temporary and BAC, along with other stocks, will be higher at the end of the year than they are now.  Companies are reporting increased profits, raising dividends and many are optimistic about the upcoming year.  It certainly seems like there is more pessimism in the market that is actually warranted.

Many of the stocks that I own and write Covered Calls upon also pay dividends.  Dividends happen on a regular basis and add significantly to my annual investment income.  For example, I received a total of $6,864.10 in dividends in my various accounts for 2009.

I have received notice of the following dividends paid in my Taxable account and various IRA accounts for a total of $251.36:

Dividends Received

I use my basis per share, excluding dividends, to determine the simple and annualized percentage return because I feel that it gives me a better representation of the value of the dividends as they relate to my portfolio.  My basis may be above or below the market price which causes my return to be lower or higher than published yields for a stock.

Near the end of trading yesterday, 12/17/09, I STO 2 BAC Jan10 15 Puts for a net deposit of 120.49 in an IRA account.  My basis for these BAC shares would be 14.40 if put to me.

This transaction represents a 3.8% raw return or 48.82% annualized, on the strike price.  BAC currently pays only a .01 quarterly dividend, down from .64 in Sep 2008.  I fully expect the dividend to be raised, if not in 2010, then during 2011, although probably not to it former level.

I already own 500 BAC shares in this same IRA account with Jan10 17.50 Covered Calls sold against them.  My basis for the 500 shares is 23.12.  I would actually like to have the two new Puts assigned to me which will allow me to average down with the existing 500 shares that I own.  However, I suspect that these Puts will expire worthless in January.