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.