Subject: Re: On Topic (really :): A Berkshire Hathaway question
It would have taken a full 5 years until the sell threshold of 1.4 was reached again => the calls expired worthless or with the same effect would have been rolled out numerous times.

This is what I struggle with.

In a worst case scenario where BRK remained low for an extended period of time, even DITM calls may expire worthless, and then you'd need to raise some money to buy new calls to keep the strategy going. The possibility of this happening multiple times is where the risk of kaboom (permanent loss of a lot of money) seems to exist.

Granted, it'd probably be a small risk, but we've had one Great Depression before, so we could certainly have another (or worse).

The challenge I wrestle with: I have no way to raise significantly more funds in most of my accounts if repeated worst case scenarios unfold.

I can't raise additional funds at all in my IRAs, so to mitigate this risk, I'd need to start out with a fraction of my funds committed to calls in those accounts (let's say 30%) and then only increase that if calls start expiring. And if we're talking DITM calls, the leverage is already pretty modest there (let's say 1.4x). So take that modest leverage and dilute it even further by 30% of funds, and then deduct trading costs, and I'm left mulling over whether it's even worth doing for the small advantage it might afford.

Taxable accounts on the other hand seem like a more lucrative place to try this with a larger % of the portfolio, but I don't have much equity in other assets (like my home) to tap if I needed to raise funds there. If I knew I could raise significant funds easily if the worst case above happened, that'd change things. I'm definitely a bit envious of Jim's previously stated ability to raise significant funds in this scenario!

On that note, if anyone has come up with creative ideas for a person without significant home equity or alternate assets to raise significant funds, I'd love to hear it!