Today, 5/9/12, I bought 100 SPLS shares at a net cost of $1,504.99 and sold 1 Jun12 $16.00 Covered Call for a net deposit of $11.24.  My basis for these SPLS shares is now $14.94.  These transactions represent a simple return of about .75% and an annualized return of about 7.38% on my basis.  If called away in June I will realize a simple return of about 5.73% and annualized return of about 56.51%.

I have never owned SPLS and rarely own any retailer.  I was reading an article (see the article here) this morning on SPLS, checked the stock price, dividend, option premium and decided that it was worth a shot.  It helped that this purchase fit with the cash I had available in this account.   

S&P has a 12-month price target of $20 and a Buy recommendation for SPLS.  MarketEdge has a Neutral rating and a price opinion to $14.86.  The 17 Yahoo! Finance analysts have a 1-year price target of $17.38 and a recommendation of 2.3 where 1.0 is a Strong Buy and 5.0 is a Strong Sell.

I don’t know that I will be considering SPLS to be a part of my core.  It does pay a reasonable dividend at 11 cents per quarter or about 2.95% on its current price.  SPLS increased its dividend to the current 11 cents in March from a previous 10 cents.  An increasing dividend is always a good sign.

Today, 2/28/12 I bought 200 additional shares of MWW (at a net cost of $6.73 per shares) to increase my holdings to 500 shares and to average down my basis.  I then sold 5 MWW Jan13 $10 Covered Calls for a net deposit of $138.19 in an IRA account.  My basis for these MWW shares is now $14.41.  This transaction represents a simple return of about 1.88% and an annualized return of about 2.11% with 326 days to expiration.

I would have preferred to sell a closer expiration month but just got impatient waiting for MWW to move high enough to sell the $10 strike for a decent premium.  MWW is selling at $6.69 as I write this and I suspect at this time that the Jan13 options will probably expire worthless.  I think I could easily roll out the Jan13 options to if it appears that MWW will be in the money as expiration approaches.

My current feeling is a turn around from just a little over one month ago.  In January, I sold the Feb12 $10 strike thinking I might need to roll them out.

S&P has a 12-month price target of $6, down from $12.00 in January, and now has a Sell rating from an earlier Buy.  Market Edge Second Opinion has a price opinion of $7.22, slightly down from $7.92 last month, and has an Avoid rating, down from Neutral.  The 13 Yahoo Analysts that cover MWW have a 12-month price target of $10.88, down from $12.81 last month, and a mean recommendation of 2.7, down from 2.2, where 1.0 is a Strong Buy and 5.0 is a Strong Sell.

MWW does not pay a dividend and has been somewhat of a laggard in my accounts but that is probably a function of the economy as much as anything.  Eventually I expect that I will let MWW be called away from me…unless of course my basis is so reduced that my option premiums tempt me to continue holding onto it.  Purchasing the additional shares will help me to achieve either of these goals.

Today, 2/21/12, I bought 200 additional shares of ZQK at a net $4.68 per share to average down my ZQK basis.  I then sold 6 ZQK Aug12 $5 Covered Calls for a net deposit of $227.43 in my taxable account.  My basis for these ZQK shares is now $7.18.  This transaction represents a simple return of about 5.01% and an annualized return of about 10.22% on my prior basis if held to expiration.

I don’t have much to say about ZQK.  I have been disappointed with it and will exit it at some point by allowing them to be called away.  A big reason for that is that ZQK does not pay a dividend and as you know by now I have a strong bias toward dividend paying stocks.  The other reason is that the options are not very profitable.  On the other hand, as my basis is decreased the return on the basis tends to increase.  As with other stocks that I own I may find that just continuing to sell Covered Calls may begin to be worthwhile.

I chose the $5 strike price because it has proven to be a good one for me in the past even though ZQK has moved above $5 now and then this past year.  Even though that strike price is below my average basis, I stand to earn a profit on the 200 shares I purchased today.  I will consider buying some additional shares to average down further if my current Calls expire worthless in August.

There continues to be fewer analysts following ZQK than there had been.  For instance, S&P does not have a current price target on it.  MarketEdge currently has a price opinion of $3.46 and a Long recommendation.  The 7 Yahoo analysts currently have a 12-month price target of $4.99 and an opinion of 1.9 where 1.0 is a Strong Buy and 5.0 is a Strong Sell.  If they are right I should be able to continue to sell the $5 strikes or roll out my existing Calls at the same strike for awhile, each time reducing my basis by a few cents.