Yesterday, 8/24/10, I sold 1 DD Sep10 40 Put for a net deposit of $107.22 in my taxable account.  My basis for these DD shares, if put to me, would be 37.97, excluding trading costs.

My DD Aug10 40 Put expired worthless.  I decided to place the same trade for September and am treating this as an extension of the prior trade by continuing to reduce my basis by the accumulated premium options from the prior trade.

The various analysts are all over the board regarding DD, some are long, some are neutral and others are less enthusiastic. There does seem to be some consensus in that DD is fairly valued around $38 at this point. 

This option trade produces about a 2.6% simple return and about a 41.4% annualized return on the potential assigned cost (excluding prior premiums) if Put to me.  The annualized return appears so high because there are only 24 days left to expiration.

DD pays a 41 cent quarterly dividend for about a 4.14% annualized return at the current price.  Add the option premiums available to the dividends and there is a pretty good annual return on the investment if it is assigned to me.  On the other hand, I can certainly roll out the Put in the next 3 weeks if it appears that the price may pull back more than I am willing to accept in order to reduce my potential future basis.

Yesterday, 7/27/10, I sold 1 DD Aug10 40 Put for a net deposit of $96.21 in my taxable account.  My basis for these DD shares, if put to me, would be 39.04, excluding trading costs.

This option trade produces about a 2.3% simple return and about a 36% annualized return on the potential assigned cost if assigned.  The annualized return appears so high because there are only 24 days left to expiration.

DD pays a 41 cent quarterly dividend for about a 4.07% annualized return.  Add the option premiums available to the dividends and there is a pretty good annual return on the investment if it is assigned to me.  On the other hand, I can certainly roll out the Put in the next 3 weeks if it appears that the price may pull back more than I am willing to accept in order to reduce my potential future basis.

I sold 2 DD Feb08 42.50 Puts for a net deposit of $150.50 in an IRA account.  This is an annualized 25.07% return on the potential liability.

This is my first activity with DD.  It came to my attention yesterday on Jim Cramer’s show.  His thesis is that DD has already reported and that there should be no surprises for the near term.  Although some analysts have recently downgraded the stock there appears to be room for future upgrades.  The various research aggregators rate DD as a hold or a buy.  The Jaywalk Consensus of independent research providers (provided to me by E*Trade) show the following distribution:

Independent Research Provider Rating Distribution for DD