Invite ye felawes and frendes desirous in gold to enter the gates of Shrewd'm, for they will thanke ye later.
- Manlobbi
Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤
No. of Recommendations: 5
On 1/30 I sold $405 Calls with an expiration of 4/19. I made $346.50 per Call. They got assigned on 4/19, so my broker sold the stock for $405 per share ($40,500 per Call).
Should I be surprise they were assigned? On 4/19 the Open was 401.04, High was 405.57 and close was 405.08, barely above the exercise price.
Now it looks to be trading around 402.20. If I just buy the stock back at today's price, my round trip will have gained me $6.26 per B share.
Should I get fancier with the options and sell cash backed puts for a better entry price?
No. of Recommendations: 0
" Now it looks to be trading around 402.20. If I just buy the stock back at today's price, my round trip will have gained me $6.26 per B share."
Good morning, are you an American ? Did this happen in a taxable account ? If the stock traded 1/2 above the strike that's enough to generate the stock being called and possible sold. Would you be selling the puts in a taxable account ? Good luck.
No. of Recommendations: 3
Should I get fancier with the options and sell cash backed puts for a better entry price?
I wouldn't sell a put merely because I want a better entry price.
There should be a reason to believe that the stock price will fall to your strike.
Or, if you sell a slightly in-the-money put you increase your odds of ownership, and you still make some money if the stock price rises.
No. of Recommendations: 1
It's in an IRA, so no tax issues from having sold. I don't think I'd do the same moves in a taxable account, as it leaves too much of my income for the year to chance.
No. of Recommendations: 5
On 1/30 I sold $405 Calls with an expiration of 4/19. I made $346.50 per Call. They got assigned on 4/19, so my broker sold the stock for $405 per share ($40,500 per Call).
Should I be surprise they were assigned? On 4/19 the Open was 401.04, High was 405.57 and close was 405.08, barely above the exercise price.
Interactive Brokers' policy is that options are assigned if they are $0.01 ITM or more at expiry, so you shouldn't be surprised they were exercised.
Regarding getting back into BRK.B now, you have to make a decision about whether the share price is average compared to the company's value, or above, or below. And you can sell puts that are above, below, or ATM, which affects how likely it is they will be exercised, and how badly you want to own the shares again. With the stock at $404.3 currently, if you are not-so-interested, you could sell June $390's (~$3.95), if you are ho-hum, sell the June $400's (~$6.73), and if you are wanting back in, maybe sell the June $405's (~$8.70).
Tails
No. of Recommendations: 11
Should I get fancier with the options and sell cash backed puts for a better entry price?
To each their own I say.
I had some shares called away in March due to covered calls I had sold. Recently I have been selling some cash backed puts for June and July trying to target owning the shares at or below long term median price to peak book. The annualized return on the premium earned is quite low but the cash I’m holding is still earning 5%+, so in total it doesn’t take much to get to a decent overall expected return, IF the stock price stays flat.
The outcomes are either I make a 9-11% return on my cash at risk or end up owning shares at a price I’m ok with. If the stock price runs up then maybe I have some FOMO, but if that happens the game has changed on BRK and I need to re-evaluate based on the new rules to the game.
FWIW, I think Q1 book value will come in at something like $263.90 when we get the numbers Saturday. Median price to peak book is around 1.37 so median share price should be around $362. I’m guaranteed to be wrong but close enough can be useful.
Jeff
