No. of Recommendations: 15
The January 2026 Berkshire LEAPS options are trading now.
As an example, you could buy the January 2026 $190 call (currently the lowest strike) for about $194.25.
That equates to an implied interest rate of 6.21%/year. Annualized linearly, not compounding.
The interesting thing is that, since the January 2024 and January 2025 calls are already trading and the prices are known, you can see what the implied interest rate is in different segments of time.
From now till January 2024, 128 days, it's 8.14%/year rate.
For the middle year from then till January 2025, it's 6.67%/year rate.
For the final year from January 2025 to January 2026, it's 5.22%/year rate.
I presume these figures arise from a mix of stock volatility assumptions and anticipated short term interest rates.
Quite the fall in rates, though.
Note, I'm not recommending these as an investment, nor not recommending them, just mentioning what the prices look like.
If you do hold calls all the time, you have to roll them from time to time. If you are going to roll calls forward (out, or up-and-out), ideally you want to roll them on a day that the market is calm, the stock price is relatively high, and the implied interest rates are low. We don't have much control over the third factor, but it's a good week based on the first two criteria.
It seems quite possible that short term rates 1-2 years from now might end up lower than today's consensus of what they will be 1-2 years from now. If the economy cracks, policy rates will stop rising and might start falling. So it's possible that rolling less than the maximum time (e.g. to 2025s instead of 2026s), or waiting before rolling, might work a hair better than rolling to the maximum duration now. Hard to say.
Jim
