Post #12062 by Mark on the Berkshire Hathaway board

Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤

Unthreaded | Threaded | Whole Thread (8)

Post New | Post Reply | Report Post | Recommend It!

No. of Recommendations: 1

Feb 27 2024: BRK 494 VIX 18
Suppose you bought the 50% DITM BRK call below (discussion will be `per share' for simplicity, and not `per contract'):
Jan 15 2027 (687 days) strike 250 call bid 267.50 ask 272 mid 269.75

Okay. Let's say you buy this call on 2/27/25 for $269.

You'd be buying puts and losing about 14.25 every 65 days for the life of the call of 687 days.

And let's say you buy a put every 65 days for $14, but only lose half of it on the roll, so you sell the put for $7 and buy the new one for $14.

Now, let's say the stock is 600 on January 15, 2027.

Here are your cash flows and your internal rate of return. Looks like you just barely break even. Why bother in the first place? Just buy half as much stock for 500 instead, do nothing for 2 years, and get a nice 20% return over the period!

2/27/25	-269	buy 250 strike call
2/27/25	-14	buy first put
5/3/25	7	
5/3/25	-14	
7/7/25	7	
7/7/25	-14	
9/10/25	7	
9/10/25	-14	
11/14/25 7	
11/14/25 -14	
1/18/26	7	
1/18/26	-14	
3/24/26	7	
3/24/26	-14	
5/28/26	7	
5/28/26	-14	
8/1/26	7	
8/1/26	-14	
10/5/26	7	
10/5/26	-14	
12/9/26	7	
12/9/26	-14	
1/15/27	7	sell last put
1/15/27	350	sell 250 strike call
		
XIRR	0.67%

Post New | Post Reply | Report Post | Recommend It!

Print the post

Unthreaded | Threaded | Whole Thread (8)

Prev | Next

Announcements

Berkshire Hathaway FAQ

Contact Shrewd'm
Contact the developer of these message boards.

A community forum supporting civilized, and highly helpful, self-educating investors that come together for Shrewdness and merry spirits. These message boards closely follow the look and feel of the old message boards at boards.fool.com prior to the boards redirected to discussion.fool.com. Shrewd'm is not affiliated with the comprehensive and excellent investment website, The Motley Fool (TMF), in any way. The Shrewd commmunity here has owed, and continues to owe, gratitude to The Motley Fool for nurturing a culture of jovial irreverence towards Wall St, and that tradition will continue here.