Today, Mar 1, 2010, I BTC 2 IR Mar10 30 Covered Calls and STO 2 IR Jan11 32.50 Covered Calls for a net deposit of $176.93 in an IRA account.  My basis for these IR shares is now 48.58, excluding dividends received.

These transactions not only increased my strike price by $2.50 but also allowed me to lock in a profit on the Calls I closed of $264.94 because I was able to BTC them for less than I originally sold them for.  I always like when that happens but would have preferred for them to expire worthless.

I’ve been watching IR for the past month hoping it would fall below and stay below $30 so that my Mar10 30 Calls would be able to expire worthless.  I’ve also been watching for an opportunity to roll the Mar10 calls out at a net credit.  The latter condition has been true for a little while now but with the stock starting to move up again it began to become more difficult to do without rolling all the way out to 2012.  And, I am pretty convinced that IR will not be below my old Mar10 30 strike when options expire this month.  Thus, my decision to roll IR out now.

S&P currently has a 12 month price target of $40 for IR.  If they are right I will need to roll IR out again before Jan11 expiration.

IR pays a small .07 per quarter dividend which is about .5% annual yield on my basis.  That is not stellar.  IR’s dividend was .18 per quarter as recently as May 2009.  Even at .18 IR’s dividend is not great.  Over time, unless called away sooner, my basis will decline as I continue to sell new Covered Calls and the dividend yield on my basis will improve.  The Call option premium will also increase my actual return on my investment in the stock

Yesterday, Feb 23, 2010, I sold 4 NLY Jul10 19 Covered Calls for a net deposit of $90.94 in an IRA account.  My basis for these NLY shares is now 17.42, excluding dividends received.

I have been an owner of NLY shares for some time.  I had 400 shares called away in Dec09 at 17.50 when my basis was 11.41, excluding dividends received.  I quickly purchased an additional 400 shares at 17.80 and began to again reduce my basis by selling Covered Calls at the $19 strike price.  The current transaction is my second selling at that strike price.

NLY pays a very good dividend, .75 last quarter, which represents an annual yield of about 16.76%.  NLY has raised its dividend each of the prior 4 quarters.  There is of course no guarantee that the dividend will continue at that level.  In fact there is some discussion that the profitably of the company may reduce once the Fed begins to increase the interest rates.

Yesterday, Feb 23, 2010, I bought 200 shares of VZ at a net of 28.80 per share.  I then sold s VZ Apr10 30 Covered Calls for a net deposit of $36.46 in an IRA account.  My basis for these VZ shares is now 28.62.

I have owned VZ in the past, sold Calls on it and had it called away at a profit.  I should probably have gone back to VZ earlier because it is a stock that fits well into my core investing goals.  It pays a good dividend, currently about 6.61% and allows me to increase my yield through selling Covered Calls and possibly through the stock being called away at a level above my purchase price.

VZ, along with T,  is a stock that Jim Cramer identifies in his latest book “Getting Back to Even” as one that is a good stock to own in a diversified dividend producing portfolio.  Jim recently had the CEO of VZ on his show where they talked about the continued safety of the dividend payments.  There have also been several purchases by VZ insiders.