On 1/26/10, I sold 2 MO Feb10 20 Puts for a net deposit of $58.46 in an IRA account.  If Put to me my basis for these MO shares would be 19.71.

I already own 200 shares of MO with existing Covered Calls at the 20 strike on them expiring in Jan11.  My basis on those shares is 35.48, excluding dividends received.  MO currently pays a .34 quarterly dividend which is about a 7% annual yield.

If I am put these new shares I would greatly average down the basis on my total MO holdings.  I consider MO to be one of my core holdings and look to accumulate at these lower prices so will probably allow these shares to be Put to me.

Many of the stocks that I own and write Covered Calls upon also pay dividends.  Dividends happen on a regular basis and add significantly to my annual investment income.  Year to date I have received a total of $488.00 in dividends in my various accounts for 2010.

I have recently received notice of the following dividends paid in various IRA accounts for a total of $242.00:

Dividends Received

I use my basis per share, excluding dividends, 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.

On 11/24/09, I BTC 2 MO Dec09 19 Covered Calls and STO 2 MO Jan11 20 Covered Calls for a net deposit of $64.99 in an IRA account.  My basis for these MO shares is now 35.48, excluding dividends received.

I am underwater so, of course, do not want these MO shares called away.  Beyond that, I like MO for the dividends.  Mo, raised it dividend last quarter to .34 from .32 per share.  That is 7.23% on the current price but only 3.8% on my basis as of the last payout.

I rolled out to the Jan11 Covered Call because I wanted to increase the strike price and do so with a cash positive transaction.  I could only increase the strike to $20 without going out to Jan12 which I did not want to do.  At the time I made the trade I was concerned that MO would continue it price increase (which it was doing at the time) and that MO would be in jeopardy of being called away in Dec09.

Mo is dropping in price now and I may need to either outright buy some more or sell some Puts on it and be happy to take an assignment below the 18.81 that it close at today.