Subject: Re: Option strategy on Berkshire
I bought one $410 leap on Monday morning for $99.75 and I sold the $470 weekly for $1.30. I figure the weekly will usually expire worthless but when it doesn’t I’ll just roll it up and out to the next week. When I take a loss on the weekly, it will mean that the leap is doing well and I’ll just make back the loss on next week’s call.

It's not that simple. What if one week you happen to get assigned an exercise of that call you sold? It happens periodically (EVEN for options that don't make sense to exercise financially). So your trade could look like this -

2/3/25 - Buy 100 410 calls at $9975
2/3/25 - Sell 100 470 weekly at $130
2/4/25 - Stock pops to 475
2/5/25 - You wake up to an email that your option was assigned
2/6/25 - You need to deliver 100 shares and will receive $47,000 for them, stock is up to 477 now.

What do you do now? You think that your 2027 LEAP covers it, but it doesn't really. You have two choices:
1. Buy 100 shares for $47,700 and deliver them and receive 47,000. So that weekly call has a loss of $700 (loss on the trade) - $130 (premium received), or $570. That'll eat up the next 5 weeks of weekly call premium!
2. Exercise the LEAP for $410 to get the 100 shares. This would, of course, be an absurd waste of money because you could sell the LEAPs for a lot more net money.

So to determine your expected yield, you need to estimate how many option sales will "fail" (lose) and how many will expire worthless. If throughout the year, 52 weeks, 2 get exercised, 10 fail (lose), and 40 expire worthless, then you need to calculate. The 2 exercises could eat up the gains of say 10 weeks worth plus the two. The failures maybe lose 2x premium (you can decide to buy them back at that point each week) so that eats up another 20 weeks plus the 10. So now you have 52 - 30 - 10, or a net of 12 win weeks. So if you can get $1.30 on average for each of them, you gain $15.60 over the year. Calculating the yield is difficult to impossible because you have to determine which denominator to use. You "invested" $99.75 up front, BUT you also tied up some margin each week with those call option sales. The yield is probably somewhere under 20%. Is it worth it for all that work? 53 trades each year, and determining which ones to trade, and when to trade, and when to bail, and when to rollover, etc. You might even be able to get a similar yield using a LEAP spread of some sort which only involves three trades total in most cases across the entire year.