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- Manlobbi
Outskirts of Shrewd'm / Living Abroad
No. of Recommendations: 0
for those that track book closely, what is your view of BV as of the end of Q4?
No. of Recommendations: 3
I have $260.50 per B penciled in based on the numbers I track.
Jeff
No. of Recommendations: 16
Because I use this to estimate forward returns, I lean to the conservative.
With that in mind, I guessed $388,000 (= $258.67 per B)
As an aside, I figure that book per share will have risen quite a bit more than intrinsic value did in both the calendar year and Q4.
Basically, Apple. A share got more expensive faster than it rose in value.
Jim
No. of Recommendations: 0
If we use $260 as best estimate of year end BV, current P/B is around 1.48 that figure. So I wonder whether I may be a bit too eager to write covered calls. I suppose anything that would would be exercised with a net over 1.55 seems pretty good imo based on Jim’s charts of projected and real performance post 2008.
Realize we all have unique situations, but we have a lot of similar objectives as well. Are those that write covered call writers relatively content if their net profit (from writing calls+forced sale of shares) is over 1.55 range as well (say for June 2024 calls) or is there a different goal and mindset? Thanks.
No. of Recommendations: 1
Just did it for the first time in my life. Jan'25 $420's for $13.2. Based on your BV $260 that would be 1.66x together, so quite some above 1.55x if exercised - - - and only because of that I did it, because of extremely slim chances for that (and the intention to close before Jan'25 if the opportunity arises).
No. of Recommendations: 6
just did it for the first time in my life. Jan'25 $420's for $13.2. Based on your BV $260 that would be 1.66x together, so quite some above 1.55x if exercised
For a P/BV = 1.66 ((420+13.2)/260), the assumption appears to be that BV does not increase over the next year. If the BV increases by 10% in the next year, the P/BV becomes 1.51 ((420+13.2)/(260*1.1)).
Craig
No. of Recommendations: 7
Realize we all have unique situations, but we have a lot of similar objectives as well. Are those that write covered call writers relatively content if their net profit (from writing calls+forced sale of shares) is over 1.55 range as well (say for June 2024 calls) or is there a different goal and mindset? Thanks.
I am far from an expert on options, but one thing I have learned is that you should assume that any option contract you write might get executed and that you would be happy with those terms. If you would not be, don't write it.
No. of Recommendations: 1
Right.
I just have the optimistic thinking at the current high valuation I might be able to close it far before the year is over (trying to apply the lessons of a certain master teacher who posts here regularly :)
If it fails I might have learned a lesson. On the other hand the REALLY dangerous outcome of my first covered calls sale would be if Berkshire falls from here and I can close it with most of the proceeds pocketed within the next weeks, confusing luck with skills and thinking I am a genius
No. of Recommendations: 11
Are those that write covered call writers relatively content if their net profit (from writing calls+forced sale of shares) is over 1.55 range as well (say for June 2024 calls) or is there a different goal and mindset?
My thought process goes like this. I believe I can reasonably say Q4 BV will come in around $260.50 which will be a new peak BV. If we look back at history the stock has traded at a max of 1.6x BV since 2013 which to me says ~$415 is the max price we will likely see between now and the end of March (end of Q1 when we can reasonably estimate the next BV).
If you want to go one step further into the predictive dark arts, one could say if we were to close the Q1 books today we could “reasonably” assume a BV for Q1 to be ~$265. This would imply a max share price of ~$423 until the end of Q2 in June. I don’t put much faith in that number but it gives one an idea of what might be possible. Even a poor estimate is better than none at all in many cases.
If we also look at it through the lens of intrinsic value, I personally think we ended the year with IV around $380 and maybe we can get to something like $424 at the end of 2024 so both of those numbers would seem to imply we are trading near IV today and any premiums received on June options would put break even prices near IV in the future. And BRK has rarely traded at IV for very long in the last decade.
I personally have a multitude of strikes sold between March and June with break even prices of $367 to $406. I like to keep them in my tax free accounts to avoid being forced to sell any long term shares I’m holding in my taxable accounts. I’m sure there are share prices where I might be tempted even in my taxable accounts, but I’m not there yet. My goal is only to try and turn some what may be short term exuberance in the share price into a more permanent increase to my account balances.
Jeff
