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.