Subject: Re: Option Strategies to Buy More BRKB
Selling puts is very similar to covered calls, even though they may feel different psychologically.

Hmm, people always say that, armchair theorists, but I tend to disagree. The differences are huge in my view, having done rather a lot of both. The theory of equivalence, among other things, assumes you can borrow without limit and without margin calls at the risk free rate, and can earn it on your cash balances, and don't care about your cash balance, positive or negative. There are several other built in assumptions and small differences, but that alone should dispel the notion of true equivalence.

For the OP question, the most logical solution is to write cash backed puts at a strike price that, in combination with the currently available premium, would get an entry price at a valuation level you'd like. Do it repeatedly until the stock is assigned, collecting a bit of premium until then.

For example, imagine you think 1.4 times book is a reasonable entry price, being about the average on that metric over the last 20 years. Look for a strike price around or a bit above that target entry price, so the premium gets you that entry or better. Given that multiples are a bit higher than that at the moment it will likely expire worthless, so you simply do it again until it's exercised, and voila! you have your stock at a good entry valuation level. And you've likely made a pretty reasonable return in the mean time, as your cash is earning interest plus serving to let you earn a return on the time erosion.

The main observation here is that this works particularly well if you do it during a little selloff. You get more rate of return, or better entry valuation multiple, or both. Buy on dips works no matter how you're doing your "buy".

A more subtle observation is that if you aren't really trying to maximize the income, you can get a better entry valuation level within reach by going for longer expiration dates. A stock price that would seem cheap right now might be a normal expectation a year from now, as value generally rises over time.

As a numerical example (NOT a recommendation), maybe 2026-Q3 book, announced around the middle of Q4, might be around $357 per B share assuming trend growth of around (nominal) 2.5%/quarter. A notional 1.4 times book would mean a market price around $500 in mid/late Q4 would be unsurprising. So any assigned short put that got you an entry under $500 around year end would get you a "fair" entry. Conveniently, the stock price is around that neighbourhood now, so option premiums around that range are quite high. (time value is at its highest at stock price = strike, and time to expiry long). Random example, a September $510 put is currently bid around $27.50, which would get you an entry price of $482.50 which would be 1.35 times our guess of Q3 book. Not bad. If it isn't exercised, you make 5.7% on the $482.50 you commit to the project, in 249 days, or about 8.35%/year rate annualized linearly. That is added to whatever you're earning on the cash deposit. The strike is just a bit higher than where we think the stock price might be, so this line of reasoning suggests you might expect a slightly better than 50/50 chance of assignment.

A post from a year and a half ago discussing this general subject. Note that it's an old post, so mentions of "Q4" mean Q4 of 2024 : )
https://www.shrewdm.com/MB?pid...

Jim