I sold 4 FNM Mar09 2.50 Covered Calls on 10/22/08 for a net deposit of $37.00 in an IRA account.  My basis for these FNM shares is now 8.72 excluding dividends received.

FNM is no longer paying any dividends since the Feds stepped in and established a conservator-ship.  I am actually confused as to what exactly that means to me as a stock holder.  The same with FRE.  Both stocks continue to trade and I continue to be able to sell Covered Calls on them.  I guess I’ll continue to do so until I can (if I can) recoup my investment.

As I reported last weekend I was assigned my 4 FNM Aug08 10 Puts.

On 8/18/08 I STO 4 FNM Sep08 9 Covered Calls for a net deposit of $169.00 in an IRA account.  My basis for these FNM shares is now 8.81.

FNM was a gamble to begin with when I first sold the Aug08 10 Puts.  For awhile I actually thought it would stay above 10 and I would walk away with my entire option premium.  I thought that if put to me I would collect the (then) good .35 quarterly dividend and start selling Covered Calls.  Then FNM cut its dividend to .05 which is still about 4% but not nearly as good as it was.  So I take the smaller dividend and will still sell Covered Calls.  The current call premium represents an annualized 78.32% return on my basis.

The only thing wrong with this story is the talk that the Feds may come in and recapitalize FNM which, as I understand it would probably wipe out the current stock holders, including me.  :-(  Well, I guess that is part of the gamble.  If that does not happen I think I will be okay with this one.  If it does happen…well sometimes you win some and sometimes you don’t.

Here are the results for the options that I still had outstanding when the markets closed on Friday, 8/15/08.  I had four Put assignments and 22 Calls across multiple accounts that expired allowing me to keep all of the option premium.  The 22 Calls are summarized by stock across accounts resulting in 16 stocks being represented in the following list.  I will begin to sell Calls on these stocks starting tomorrow.