Today, 10/24/11, I STO 3 BAC Dec11 8 Covered Calls for a net deposit of $32.73 in my taxable account.  My basis for these BAC shares is now $7.17.  This transaction represents a simple return of about 1.50% and an annualized return of about 6.21% with 88 days to expiration.

Just as last month, I can let BAC be called away in December and be money ahead which is really my goal here as I am treating BAC as a trade in this account.  However, I am not convinced that BAC will be above $8 in December.  There is an awful lot of negative commentary working against BAC which is tending to hold it down.

S&P currently has a 12 month target of $8, down from $10 last month, and a 4 star (Buy) rating for BAC.  MarketEdge has a price opinion of $6.46, down from $7.19 last month and has increased it rating to Neutral from an earlier Avoid.  The 25 Yahoo Analysts currently have a 12 month price target of $10.12, down from $12.20 last week, and a recommendation of 2.4 where 1.0 is a Strong Buy and 5.0 is a Strong Sell.

Today, 10/3/11, I BTC 9 BAC May12 $10.00 Covered Calls and STO 9 Jan12 $7.50 Covered Calls for a net deposit of $95.37 in an IRA account.  My basis for these BAC shares is now 15.97, excluding dividends received.  This transaction represents a simple return of about 1.28% and an annualized return of about 3.80% if held to expiration.

I took advantage of the market move down over the last few days to try to make a little extra option premium from BAC.  I took a chance by selling at such a low strike price but like that I was able to bring the expiration in four months.

S&P continues a 12 month target of $10 for BAC with a 4 star (Buy) rating.  MarketEdge has decreased its price opinion to $6.31 from an earlier $10.70 and now has an Avoid rating.  The 25 Yahoo Analysts have a 12 month price target of $10.90 with a 2.3 recommendation where 1.0 is a Strong Buy and 5.0 is a Strong Sell.

BAC currently pays a paltry .01 quarterly dividend.  It has paid a .64 quarterly dividend as recently as September 2008.  I believe that BAC will eventually raise its dividend again.  I don’t know if it will be back to the .64 level but certainly it should be well above what it is now.  I continue to believe that BAC will be a strong winner for me one day, or maybe I should say someday in the future.  With that said, BAC has been performing pretty poorly lately and it is only my ability to buy and close these option contracts that keeps me interested in it at this time.

Many of the stocks that I own and write Covered Calls upon also pay dividends.  Dividends occur on a regular basis and add significantly to my annual investment income.  Year to date I have received a total of $6,848.47 in dividends in my various accounts for 2011.  My year to date average monthly dividends received is currently $760.94.  The year-to-date dividends currently represent about 27.82% of my average monthly investment cash flow and about 2.12% return on my current basis value.

My YTD dividends are up by $156.67 on a monthly average from last year.  That represents a 25.93% increase to date year over year.  I attribute the increased dividends to a few companies raising their dividends and to my purchasing additional dividend paying stocks.  During August, I received notice of the following dividends paid in various accounts for a total of $730.02.

Please notice that PGF is an ETF and pays dividends monthly.  The annualized dividend yield for PGF is based upon the simple and false assumption that it will pay the same dividend each month for the next 12 months.  The actual annualized dividend yield may be more or less than illustrated here.

I use my basis per share 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.  I calculate my basis per share as my acquisition price less any option premiums received on those shares.  I do not use dividends to reduce my basis.