Today, 7/28/11, I sold 8 YHOO Oct11 17 Calls for a net deposit of $159.94 in an IRA account.  My basis for these YHOO shares is now 16.38.  This trade provides a 1.21% simple yield and an annualized 5.12% yield on my prior basis.

I considered selling the Jan12 17.50 or 19 strikes.  The 17.50 strike would have generated the greatest current cash flow but the October 17 strike produced the greater annualized return.  The greater cash flow was tempting but the greater annualized return was more compelling.  The return on investment is almost always better than the simple cash flow which can be deceiving.  I am pretty sure that if YHOO appears to be above my strike price in October that I will be able to roll my Calls out and quite possibly up.

I was assigned 2 YHOO Put contracts in July which increased my YHOO holdings to 800 shares and reduced my basis even further.  I might have rolled out the July Puts but being on vacation and not being able to stay right on top of them I decided earlier that I would just let them be assigned and not worry about it.

I continue to be short 2 Oct11 15 Puts on YAHOO in this same account.  At the moment, with YHOO trading at $13.61, I may end up with another 200 shares in a few months.  I will keep an eye on the October Puts and decide as October get closer if I should roll them out, if they might expire worthless or perhaps look forward to the assignment as it will further reduce my basis.  If this keeps up my return on YHOO option premiums will be large enough that I will want to continue to hold them for the premium income. 

YHOO does not pay a dividend so it does not meet my general investment goals.  However, as I suggested above, I am starting to think that I might like to continue owning it to sell the Covered Calls and, in effect, create my own dividend while at the same time decreasing my basis.  As an FYI, I have received a net total of $7,420.61 in option premiums on YHOO going back to 2006.

Today, 6/22/11, I sold 2 YHOO Jul11 15 Puts for a net deposit of $74.48 in an IRA account.  My basis would be about $14.69 if these shares are Put to me.

This trade provides a simple yield of about 2.47% and an annualized yield of about 37.60% on my cost if the shares are assigned to me.  The annualized return is so high because there were only 24 days left to expiration on these Puts.

As you may remember, I already own 600 YHOO shares in this same IRA account with an average basis of 17.20 and Covered Calls on them for the Jul11 19 strike.  I suspect that these Puts will expire worthless but if not, and the stock price as we near option expiration is above or near my basis I will probably take the assignment and add them to my existing 600 shares to further average down my basis and sell Covered Calls on the lot.

I had that same reasoning earlier in the year when I sold May 16 Puts but YHOO fell far enough then that I rolled out those Puts to Oct11 and reduced the strike price to $15.  I hope that does not happen again with these new Puts.

YHOO does not pay a dividend so it does not meet my general investment goals.  However, I am finding that it is not a bad position to trade around…at least not at the moment.  I feel that there is about an even chance that these current Puts will be assigned to me but you never know.  YHOO! Finance currently has a 12 month price target of $19.46, up from an earlier $18.48 back in April, with a 2.4 opinion being expressed by the various analysts that contribute there.

I repeat what I have said on other occasions that I had been hesitant to sell Puts on YHOO in the past but they have been so profitable to me that I am beginning to look upon them as a part of my portfolio even though they do not pay a dividend.  A general rule I am using for selling Puts on YHOO, and other stocks, is that they must be able to reduce the basis when combined with other shares I own it the same account.  At this point YHOO continue to satisfy that rule.

Today, 5/13/11, I BTC 2 YHOO May11 16 Puts and STO 2 YHOO Oct11 15 Puts for a net deposit of $120.97 in an IRA account.  My basis for these YHOO shares would now be about 13.27 plus trading costs if Put to me.  This trade provides about a 4.0% simple yield and about an annualized 9.02% yield on my potential basis.  In addition to the cash flow, this transaction reduced my potential acquisition price and basis by one dollar per share or $200 total.

I felt pretty comfortable with my May11 16 Puts, expecting them to expire worthless next week.  And then there came the news about Alibaba transferring all of the Alipay interests to Jack Ma in China.  Yahoo owns a substantial portion of Alibaba (about 30% if I remember right) and Alipay was apparently considered to be a jewel among Yahoo investments.  Yahoo is saying they were only recently told of the transfer and Alibaba says that Yahoo was told back in 2009.  At the moment nobody seems to know where lies the truth of the matter.  That was a fairly surface description of the issue but is generally why Yahoo seems to be falling and why I decided to roll out and down my May Puts.