Subject: Re: Puts
I jumped the gun and wrote June $375 calls, with a break-even of $390. I'll keep rolling them because I don't see BRK as a stock that is going to run away from me. Too predictable. It could take months for my calls to break even, but it'll happen eventually.


This is somewhat similar to my situation. The price has been higher lately than originally appeared likely--a rare season in the sun for Berkshire shares. My original guesstimate of likely late-2024 market price was around $380, if valuation multiples and growth rates had both remained typical of recent years. (seems silly now, but it didn't then). I have rolled my positions, some more than once, and nothing has been called away.

When you roll your calls up and out, try to pick contracts that meet all of these tests:
(a) you are increasing your breakeven. New strike+premium is higher than old strike+premium.
(b) each roll is for a credit, not a debit. The premium on what you're selling is higher than that on what you're buying. You are gaining cash, not consuming cash.
(c) since you are rolling to a later date, you ideally also want to be increasing your breakeven by an amount which approximates how much fair value is likely to rise in that amount of time. Otherwise your new exit could be at a higher price but not at a richer valuation multiple.


You will typically find that test (a) will be met. But in order to meet (b) you will have only a pretty modest benefit on criterion (a), so keep an eye on (c).

The reasons for (b) is that you don't want to rack up a bunch of cash losses from your rolls that you have to recoup later with more and more premiums. It's best not to be in the situation of having to dig yourself out of a hole cash-wise. And the reason for (c) is that if you end up having to roll more than once, you don't want your exit valuation multiple to be ratcheting downwards.

Jim