Today, 8/24/10, I sold 2 YHOO Oct10 15 Puts for a net deposit of $30.47 in an IRA account.  My basis for these YHOO shares is now 13.62.

This trade provides a 1.11% simple yield and an annualized 7.71% yield on my basis.  While nothing to get real excited about, 7.71% is not a bad return and is above my current average annualized return of 4.58% for my option premiums.  If called away, my simple return will be 10.15% with an annualized return of 70.64%.

I own an additional 400 YHOO shares in this same IRA account with a basis of 19.88 with Covered Calls expiring in Jan11.  I had originally thought that I would also sell Jan11 Covered Calls on the new shares well out of the money with the idea that I would combine them with the prior 400 shares to reduce my average basis.  I took another look at the possibilities and instead decided to sell the Oct10 Calls at a lower strike price.  I get a smaller premium amount but increase my annualized return while increasing my total dollar return if the shares are called away.  In essence, I am looking at these new shares as a short term trade.

YHOO does not pay a dividend so it does not meet my general investment goals.  However, as a trade at this level YHOO may provide a pretty decent return.

Yesterday, 7/26/10, I sold 4 YHOO Jan11 19 Calls for a net deposit of $58.94 in an IRA account.  My basis for these YHOO shares is now 19.73.

This trade provides a .74% simple yield and an annualized 1.52% yield on my basis.  This is not a yield to brag about.  However, I did raise my strike price by $1 over the Call contract that expired in July.  I went with the higher strike price and consequently lower premium in order to get closer to my basis price for the stock.

In addition to these 400 shares that I own, I have also sold 2 YHOO Aug10 14 Puts which I wrote about earlier.  As of this writing YHOO is trading at $13.94 making me vulnerable to owning an additional 200 shares of YHOO.  If they are Put to me I will probably sell Jan11 Covered Calls at a strike price high enough that they will probably expire worthless.  Doing so will allow me to combine them with the 400 other shares to reduce my average basis.

YHOO does not pay a dividend so it does not meet my general investment goals.  However, as I indicated, I already own YHOO and would like to take the opportunity to average down.  Averaging down allows me more flexibility in choosing the next strike price for selling new Covered Calls without the risk of being called away at a loss on my basis.  In addition, if I can continue to sell Covered Calls on the stock I can, in effect, create my own dividend while at the same time decreasing my basis.

Today, 7/9/10, I sold 2 YHOO Aug10 14 Puts for a net deposit of $66.46 in an IRA account.  My basis for these YHOO shares, if put to me, would be 13.67, excluding trading costs.

This trade provides a 2.29% simple yield and an annualized 19.77% yield on my cost if the shares are Put to me.

I already own 400 YHOO shares in this same IRA account with a basis of 19.88.  If Put to me these new YHOO shares would decrease my average basis.

YHOO does not pay a dividend so it does not meet my general investment goals.  However, as I indicated, I already own YHOO and would like to take the opportunity to average down.  Averaging down allows me more flexibility in choosing the next strike price for selling new Covered Calls without the risk of being called away at a loss on my basis.

At first I was hesitant to sell these new Puts but when I considered the return on them and considered that the option premiums make a decent substitute for dividend income I decided to go ahead.