Well, here we are in the last week for the Aug09 Options.  It appears as if the sell off that started last week may continue.  I was actually hoping for some weakness this week because I had several Covered Calls that were in the money last week.  At various times my Calls on BA, BMY, MWW, RYL, and BAC were in the money.  Today, only BMY and RYL are still in the money but both are down close to the strike price and look as if they may fall out of the money as long as the current trend continues.

I have a mixed feeling on the BMY shares.  I originally purchased them late in June and sold August Covered Calls above my purchase price with the idea that they would be called away giving me a short term profit if about $200.  I also collected a $62 dividend early this month.  Not too bad.  However, my original reason for looking at BMY is rearing its head.  BMY pays a good dividend (6.31% on my basis on Aug 3) and I can write reasonable Covered Calls on it.  With that in mind I have decided to try to hang on to BMY for now.

If the weakness does continue this week I suspect that I will be able to sell some new Puts on some stocks I might like to own more of next week.  For example: Dec BMY 20, Sep AA 11 or 12, Oct AA 10, Sep RYL 18, 19 or 29, Sep BAC 15 or 16.

I sold 2 BP Oct08 75 Puts for a net deposit of $290.50 in an IRA account.  My basis in these shares is now 71.90 after accounting for accumulated options.  I usually prefer to sell closer in options but did not do so in this case.  I wanted to sell the 75 strike and get a reasonable premium so I sold further out this time. 

I have a long term belief in oil and some of the oil stocks so I was a little aggressive when I originally sold the BP Puts.  BP has a decent dividend at .81 per quarter and 4.82% annualized.

I sold these calls in early April after watching the stock fall to the low 6 range.  It looked like it would languish there for awhile and the 7.50 Calls would be safe (expire worthless).  Then DIVX reported increased earnings and sales and it started to climb and actually gaped up at one point.  I was rather expecting that it would fall back again but to no avail.  The stock is at $9.44 as I write this and still methodically climbing to somewhere.  I these DIVX lots at various prices from 16.24 to 20.84 so am happy that the stock is recovering even though I took a hit on the options today.  If this continues I should be able to sell new Calls at the $15 strike price or better with a reasonable premium thus making my BTC today worthwhile.

My basis is now 83.44 for these MO shares.  Since I have owned MO I have received spin off shares of KFT which I have kept and sell call on and I will also receive 200 shares of the new Phillip Morris International (PM) on Mar 28.  MO is already ex-date for the PM distribution so I expect its price will not be further effected by that anticipation.

MO is one of my “core” holdings.  It pays a good dividend at .75 per quarter but I expect that will probably drop some as a result of the PM spin off.  I also get a reasonable option premium on the calls if I continue to sell them out one month at a time.

My basis for S is now 20.41 and I feel pretty comfortable that it will not be called away at the $8 strike price.  The good news is that I’ve been able to sell calls for one or two months out after each expiration.  The bad news is that each time the strike price was lower than the last.  S does pay a quarterly dividend of .025.