Today, Feb25, 2010, I sold 2 BVF Jul10 12.50 Puts for a net deposit of $98.46 in an IRA account.  My basis for these shares, if Put to me, will be 12.01.

BVF does not have a stellar yield but it does currently return about 2.49%.  That is .09 per quarter and is down from .375 per quarter a year ago.  I am hopeful that the quarterly dividend will one day approach the prior levels.

I already own 600 shares of BVF in 2 IRA accounts, 200 of which are in the account that I sold these new Puts.  I chose to sell the Jul10 Puts for a few reasons.

I already have BVF Covered Calls expiring in this account in July.  Lately, I have begun to try to sell new Puts on stocks that I own for the same months that I already have Calls expiring for that stock.  That way, if I am assigned the Puts I will be able to sell new Covered Calls on all of the shares owned in that account which reduces per share transaction costs.

My second reason for selling the Jul10 Puts is that the 12.50 strike price is $2 below the current stock price and the option premium provides an additional .55 per share cushion should the stock to fall before I would be underwater if the stock is assigned to me.  The current basis for the BVF shares I own in this account is 18.42.  The assignment of these shares would reduce my average basis by about $4 per share.

A third reason is that these options provide me with a 10.13% annualized return on the capital reserved to cover the potential assignment.  That is not the best return I have ever made but in conjunction with other considerations noted above I am happy with it.

On 2/3/10, I sold 2 BMY Mar10 24 Puts for a net deposit of $108.46 in an IRA account.  If Put to me my basis for these BMY shares would be 23.46.

I have 200 other BMY shares with Covered Calls on them at 27, expiring in Mar10.  If these Puts are assigned to me they would average down my basis for BMY by about $1.  Not sure if I’ll get them though, BMY is only .03 below my strike price and has been holding up pretty well over the past couple of weeks.

BMY pays a decent dividend of .32 per quarter which equates to about a 5.3% annualized yield.  It is one of the stocks that I want to continue to acquire on weakness.  I consider it part of my core holdings for the dividend and option premiums that I derive from it.

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.